Incremental willingness to pay

Karine Lamiraud, Robert Oxoby and Cam Donaldson ()
Additional contact information
Cam Donaldson: Glasgow Caledonian University, Yunus Centre for Social Business & Health, Postal: Level 3 - Buchanan House, 58 Port Dundas Road, Glasgow G4 0BA, Scotland, UNITED KINGDOM, http://www.gcu.ac.uk/

No WP1516, ESSEC Working Papers from ESSEC Research Center, ESSEC Business School

Abstract: Applications of willingness to pay (WTP) have shown the difficultly to discriminate between various options. This reflects the problem of embedding in both its specific sense, of options being nested within one another, and its more-general sense, whereby respondents cannot discriminate between close substitutes or between more-disparate rivals for the same budget. Furthermore, high proportions of reversals between WTP-value and simple preference based rankings of options are often highlighted. Although an incremental WTP approach was devised to encourage more differentiated answers and a higher degree of consistency among respondents, a theoretical basis for this approach has not been elucidated, and there is little evidence to show that this approach might indeed achieve greater consistency between explicit and implicit rankings inferred from WTP values. We address both these issues. Following our theoretical exposition, standard and incremental approaches were compared with explicit ranking in a study assessing preferences for different French emergency care services. 280 persons, representative of the French adult population, were interviewed. Half received the incremental version, the other half the standard version. Results suggest that the incremental approach provides a ranking of options fully in line with explicit ranking. The standard approach was reasonably consistent with explicit ranking but proved unable to differentiate between the five most preferred providers, as predicted by theory. Our findings suggest that the incremental approach provides results which can be used in priority-setting contexts.

Keywords: WTP; contingent valuation; reference points; embedding effect; incremental approach; emergency care (search for similar items in EconPapers)
JEL-codes: D60 H40 I10 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2015-09
New Economics Papers: this item is included in nep-dcm and nep-hea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Working Paper: Incremental willingness to pay (2015)
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