Using discrete choice experiments to estimate willingness-to-pay intervals

Schlereth, C; Eckert, C; Skiera, B

Using discrete choice experiments to estimate willingness-to-pay intervals

Schlereth, C Eckert, C

Skiera, B

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Publication Type:: Journal Article
Citation:: Marketing Letters, 2012, 23 (3), pp. 761 - 776
Issue Date:: 2012-09-01

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Field	Value	Language
dc.contributor.author	Schlereth, C	en_US
dc.contributor.author	Eckert, C https://orcid.org/0000-0002-8573-6978	en_US
dc.contributor.author	Skiera, B https://orcid.org/0000-0001-9285-2013	en_US
dc.date.issued	2012-09-01	en_US
dc.identifier.citation	Marketing Letters, 2012, 23 (3), pp. 761 - 776	en_US
dc.identifier.issn	0923-0645	en_US
dc.identifier.uri	http://hdl.handle.net/10453/22656
dc.description.abstract	Willingness-to-pay has always been conceptualized as a point estimate, frequently as the price that makes the consumer indifferent between buying and not buying the product. In contrast, this article estimates willingness-to-pay (WTP) as an interval based on discrete choice experiments and a scale-adjusted latent-class model. The middle value of this interval corresponds to the traditional WTP point estimate and depends on the deterministic utility; the range of the interval depends on price sensitivity and the utility's error variance (scale). With this conceptualization of WTP, we propose a new measure, the attractiveness index, which serves to identify attractive consumers by combining knowledge about their price sensitivities and error variances. An empirical study demonstrates that the attractiveness index identifies the most attractive consumers, who do not necessarily have the largest WTP point estimates. Furthermore, consumers with comparable preferences can differ in their purchase probability by an average of 16%, as reflected in differences in their WTP intervals, which yields implications for more customized target marketing. © 2012 Springer Science+Business Media, LLC.	en_US
dc.relation.ispartof	Marketing Letters	en_US
dc.relation.isbasedon	10.1007/s11002-012-9177-2	en_US
dc.subject.classification	Marketing	en_US
dc.title	Using discrete choice experiments to estimate willingness-to-pay intervals	en_US
dc.type	Journal Article
utslib.citation.volume	3	en_US
utslib.citation.volume	23	en_US
utslib.for	1505 Marketing	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Marketing Discipline
utslib.copyright.status	closed_access
pubs.issue	3	en_US
pubs.publication-status	Published	en_US
pubs.volume	23	en_US

Abstract:

Willingness-to-pay has always been conceptualized as a point estimate, frequently as the price that makes the consumer indifferent between buying and not buying the product. In contrast, this article estimates willingness-to-pay (WTP) as an interval based on discrete choice experiments and a scale-adjusted latent-class model. The middle value of this interval corresponds to the traditional WTP point estimate and depends on the deterministic utility; the range of the interval depends on price sensitivity and the utility's error variance (scale). With this conceptualization of WTP, we propose a new measure, the attractiveness index, which serves to identify attractive consumers by combining knowledge about their price sensitivities and error variances. An empirical study demonstrates that the attractiveness index identifies the most attractive consumers, who do not necessarily have the largest WTP point estimates. Furthermore, consumers with comparable preferences can differ in their purchase probability by an average of 16%, as reflected in differences in their WTP intervals, which yields implications for more customized target marketing. © 2012 Springer Science+Business Media, LLC.

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http://hdl.handle.net/10453/22656