Economics at your fingertips  

Measuring willingness to pay as a range, revisited: When should we care?

Florian Dost and Robert Wilken

International Journal of Research in Marketing, 2012, vol. 29, issue 2, 148-166

Abstract: Recent research has conceptualized consumers’ willingness to pay (WTP) as a range rather than as a single point. However, there are important gaps in this research stream: The existing method to measure WTP as a range, ICERANGE, features restrictive assumptions and is rather complex, such that it hampers real-world applications. Furthermore, it is unclear what has been measured in the past with point-based methods, compared with WTP ranges; thus, researchers cannot evaluate “traditional” WTP measurements. Most importantly, why should anyone even care about WTP ranges? In making pricing decisions, aggregate-level information is common, and the add-on information contained in individual WTP ranges would seemingly become obsolete when averaging it across consumers. This article addresses all three issues: We show empirically that traditional point-based methods reveal the midpoint of WTP ranges. Our proposed range-based method, which is simpler and less restricted than ICERANGE, achieves comparable performance. We use a Monte Carlo simulation to show that, except for in rather artificial conditions, point-based methods fail to reproduce the revenue-maximizing prices identified by range-based methods. Together, these results deliver a compelling argument for the use of range-based methods to elicit WTP in real-world applications.

Keywords: Willingness to pay as a range; ICERANGE; BDM mechanism; Demand functions; Monte Carlo simulation (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (9) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

International Journal of Research in Marketing is currently edited by Roland Rust

More articles in International Journal of Research in Marketing from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2018-04-28
Handle: RePEc:eee:ijrema:v:29:y:2012:i:2:p:148-166