Estimating Consumers’ Willingness to Pay for the Individual Quality Attributes with DEA
Jeong-Dong Lee (),
Alexandre Repkine (),
Seogwon Hwang and
MPRA Paper from University Library of Munich, Germany
In a highly competitive environment a product’s commercial success depends increasingly more upon the ability to satisfy consumers’ preferences that are highly diversified. Since a consumer product typically comprises a host of technological attributes, its market value incorporates all of the individual values of technological attributes. If the willingness-to-pay (WTP) for individual technological characteristics of a product is known, one can conjecture the overall WTP or the imputed market price for the product. The market price listed by the producer has to be equal to or lower than this WTP for the commercial survival of the product. In this paper we propose a methodology for estimating the value of individual product characteristics and thus the overall WTP of the product with DEA. Our methodology is based on a model derived from the consumer demand theory on the one hand, and the recent theoretical developments on the flexible DEA frontiers on the other hand. The paper also presents a real case study for the mobile phone market, which is characterized by its high speed of innovation. The suggested model and its empirical applications has implications for the extension of DEA methodology to the estimation of market value of a complex multi-attribute product and/or of a value of quality attribute that is not explicitly marketable in isolation. We also expect that the framework will shed some light on the successful way of product differentiation when the cost information for individual characteristics is available.
Keywords: DEA; efficient consumption; willingness to pay; multi-attribute product pricing (search for similar items in EconPapers)
JEL-codes: D46 D12 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed
Published in Journal of the Operational Research Society No. 10.vol. 5(2004): pp. 1059-1064
Downloads: (external link)
https://mpra.ub.uni-muenchen.de/7848/1/MPRA_paper_7848.pdf original version (application/pdf)
Journal Article: Estimating consumers' willingness to pay for individual quality attributes with DEA (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:7848
Access Statistics for this paper
More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().