A de-biased direct question approach to measuring consumers' willingness to pay

Hofstetter, Reto; Miller, Klaus M.; Krohmer, Harley; Zhang, Z. John

doi:10.48350/172106

A de-biased direct question approach to measuring consumers' willingness to pay

DOI

10.48350/172106

Publisher DOI

10.1016/j.ijresmar.2020.04.006

Abstract

Knowledge of consumers' willingness to pay (WTP) is a prerequisite to profitable price-setting. To gauge consumers' WTP, practitioners often rely on a direct single question approach in which consumers are asked to explicitly state their WTP for a product. Despite its popularity among practitioners, this approach has been found to suffer from hypothetical bias. In this paper, we propose a rigorous method that improves the accuracy of the direct single question approach. Specifically, we systematically assess the hypothetical biases associated with the direct single question approach and explore ways to de-bias it. Our results show that by using the de-biasing procedures we propose, we can generate a de-biased direct single question approach that is accurate enough to be useful for managerial decision-making. We validate this approach with two studies in this paper.

Date Issued

2021-03

Publication Type

Article

Subject(s)

300 Social sciences, sociology & anthropology > 330 Economics

600 Technology > 650 Management & public relations

Language(s)

en

Author(s)