Finally, researchers often motivate participation in an experiment by paying some remuneration or providing an initial balance to bid in an auction. Third, the hypothetical bias is greater for higher valued products, specialty goods (cf. Third, the hypothetical bias depends on a variety of factors, including individual-level considerations (Hofstetter et al. Journal of Marketing Research, 39(2), 228–241. 2003). Similarly, consumers’ uncertainty might be reduced in a WTP experiment by giving them an opportunity to inspect and test the product before bidding. Ultimately, we identified 77 studies reported in 47 articles, accounting for 117 ESs and total sample sizes of 24,441 for HWTP and 20,766 for RWTP. With our meta-analysis, we aim to generalize empirical findings about the relative accuracy of HWTP measures, so we conducted a search for studies that report ESs of these measures. We also do not find support for H7 in the model-free evidence, because studies with an initial balance and participation fee report higher ESs than those without. Journal of Retailing, 90(2), 255–274. 1984; Völckner 2006). The resulting ESs correlate, because they are based on a common subject. In addition, as studies may have used alternate experimental designs, different standard deviations could be used across studies, leading to standardized mean differences that are not directly comparable (Morris and DeShon 2002). (2011). Numerous approaches to measure willingness-to-pay International Journal of Research in Marketing, 26(2), 108–118. You'll see how one company, Adios Junk Mail, used surveys to better understand WTP. However, when measuring RWTP, budget constraints limit the amount that participants may contribute (Brown et al. Measuring consumers’ willingness to pay at the point of purchase. “Coherent arbitrariness”: Stable demand curves without stable preferences. Journal of Marketing, 82(3), 1–24. In their web appendix, Miller et al. (2018). Journal of Finance, 16(1), 8–37. Because indirect methods represent a shopping experience, they are expected to be more accurate for measuring HWTP (Breidert et al. 2006) and has not previously been revealed in meta-analyses (Carson et al. Journal of Marketing Research, 55(5), 686–703. Another source of uncertainty pertains to product performance, and it increases when the consumer can only review images (e.g., online) rather than inspect the product itself physically (Dimoka et al. Contingent valuation and revealed preference methodologies: Comparing the estimates for quasi-public goods. Non-pecuniary values of environmental goods can be measured in two formats, Willingness to Pay (WTP) or Willingness to Accept (WTA). Most moderators are dummy variables, and a change of the corresponding dummy value results in a change of (Exp(β) − 1) ∗ 100% in the hypothetical bias. 2009, p. 25). Customer value assessment in business markets: A state-of-practice study. Second, the parameters (β) for the moderating effects in the meta-regression are easy to interpret, as a multiplication factor, by taking the exponent of the estimate (Exp(β)). Becker, G. M., DeGroot, M. H., & Marschak, J. New empirical generalizations from a meta-analysis of the market share–performance relationship. To determine the hypothetical bias induced by different methods, we need an ES that represents the difference between obtained values for HWTP and RWTP. We checked whether a study underwent a peer review process (peer reviewed), reflected a marketing or economics research domain (discipline), how many citations it had on Google Scholar (citations), and in which year it was published (year). Moving beyond extant meta-analyses in marketing, we introduce an effect size metric (i.e., response ratio) and a novel analysis method (i.e., multivariate mixed linear model) to analyze the stochastically dependent effect sizes. 1, is symmetric, which indicates the absence of a publication bias. Morris, S. B., & DeShon, R. P. (2002). Willingness to pay is an economic method for estimating patient’s inclination for a service in monetary terms. In turn, marketing researchers started to model dependence stochastically by applying multi-level regression models (e.g. Whether you set the price too high or too low makes all … Therefore, our results support H2: The hypothetical bias increases if the value of the products to be evaluated increases. Brown, T. C., Ajzen, I., & Hrubes, D. (2003). These recently developed methods have not been tested by empirical comparison studies, so we could not include them in our meta-analysis. (1994) report HWTP ($109) that overestimates RWTP ($12) by a factor of nine when excluding outliers, and it is another outlier in our database. From the collected choices, it is possible to compute individual utilities for each presented attribute level and, by interpolation, each intermediate value. If consumers do not accept the last price of the last closed question, they must answer an open question about how much they would be willing to pay (Wertenbroch and Skiera 2002). We focused on whether incentive compatibility concepts or the dominant bidding strategy were explained, using a moderator introduction of method for RWTP with four values. Journal of the American Statistical Association, 87(417), 178–183. This meta-analysis suggests several directions for further research, some of which are based on the limitations of our meta-analysis. Gensler, S., Neslin, S. A., & Verhoef, P. C. (2017). International Journal of Research in Marketing, 33, 543–556. The resulting model achieved a higher AICc than our main reduced model. Copeland, M. T. (1923). �� �o$ĵ�6q��sH��w��@��fkynn�!&�po��w*a�R&��������Q��@�Vo$N^��/p�{5�k}����Z��l�(���������yn�>(�����q��a�6Ɍ�{ Jonas Schmidt. Two independent coders, unaware of the research project, coded product type by using Copeland’s (1923) classification of consumer goods according to the search and price comparison effort they require, as convenience goods, shopping goods, or specialty goods. Environmental and Resource Economics, 20(3), 241–254. The estimate corresponds to an average hypothetical bias of 20.79% (Exp(0.1889) = 1.2079), meaning that on average, HWTP overestimates RWTP by almost 21%. However, all methods that measure RWTP require a finished, sellable version of the product. Finally, the product type moderator requires more subjective judgment. 1999). (2005) report HWTP ($11.68) values from an indirect method that overestimate RWTP ($94.48) by a factor of eight; we excluded it from our analyses. The research design also might influence the hypothetical bias (List and Gallet 2001; Murphy et al. 2012; Vega et al. Measuring HWTP and RWTP using a within-subject design results in a greater hypothetical bias than does a between-subject design (β = 0.0878, Exp(β) = 1.0918, SE = 0.0439, p = 0.0455), such that the hypothetical bias increases by an additional 9.18 percentage points in this case. This week, we'll show you two ways to measure willingness to pay: surveys and conjoint analysis. Part of Springer Nature. Simon, H. (2018). 2007, p. 200). Here, direct measurement even underestimates RWTP by 2%, while indirect measurement yields an overestimation of 7%. The elements of Vi must be calculated according to the chosen ES measure (see Web Appendix B; Gleser and Olkin 2009; Lajeunesse 2011). Neill, H. R., Cummings, R. G., Ganderton, P. T., Harrison, G. W., & McGuckin, T. (1994). Ockenfels, A., & Roth, A. E. (2006). Games and Economic Behavior, 55(2), 297–320. Accordingly, it applies to studies that measure the same outcome on different scales (Borenstein et al. Note however, that the result by Hofstetter et al.’s (2013) refers to an effect of a consumer characteristic, and might be specific to the examined product, namely digital cameras. Gensler, S., Hinz, O., Skiera, B., & Theysohn, S. (2012). Table 3 contains an overview of the moderators’ descriptive statistics. Gleser, L. J., & Olkin, I. Journal of Marketing Research, 21(4), 456–462. Simon (2018) takes a similar line, stating, “It doesn’t make sense to ask consumers directly for the utility or their WTP, as they aren’t able to give a direct and precise estimate. With respect to the method for measuring HWTP, whether direct or indirect, across all the different models, we find strong support for H1b, which states that indirect methods overestimate HWTP more severely than direct methods. To the best of our knowledge, no previous meta-analysis in marketing has applied a mixed linear model nor a response ratio to measure ESs. Thus, we excluded two of 117 observations, or less than 5% of the full sample, which is a reasonable range (Cohen et al. Perhaps most important, the type of measurement HWTP has a significant effect on the hypothetical bias, comparable in size to the effect in the main model. Willingness-to-pay: Close-ended. Experimental methods: Between-subject and within subject designs. WTP is implicitly the basis of the Value of a Statistical Life and other measures used for calculating the economic value of morbidity and mortality improvements.31–33 In addition, direct methods outperform indirect methods with regard to their accuracy. Consumers engage in more search effort when they have trouble assessing a product’s utility. Methoden zur Messung individueller Zahlungsbereitschaften: Ein Überblick zum State of the Art. Three-level meta-analysis of dependent effect sizes. Home-grown values and incentive compatible auction design. We are especially interested in the moderator type of measurement HWTP, so we computed separate boxplots for the direct and indirect measures of HWTP and thereby identified one observation for each measurement type (indirect Kimenju et al. Unlike a Vickrey auction, the auction format implemented in eBay allows participants to bid multiple times, and the auction has a fixed endpoint. Formally, we can only “not reject” a null hypothesis of no moderator effect, but these findings suggest that we can dispel fears about influencing WTP results too much by offering participation fees or an initial balance. This corresponds to the standard economic view of a consumer reservation price.Some researchers, however, conceptualize WTP as a range. In addition, value, product type (specialty), and type of subject design exert significant influences. Second, indirect methods assume a linear relationship between price levels, through their use of linear interpolation (Jedidi and Zhang 2002). We provide a detailed rationale for using response ratios and thus offer marketing scholars another ES option to use in their meta-analyses. Journal of Interactive Marketing, 38, 29–43. (2011), stronger consumer preferences lower the hypothetical bias. Babić Rosario, A., Sotgiu, F., de Valck, K., & Bijmolt, T. H. A. When does partitioned pricing lead to more favorable consumer preferences? The meta-analysis of response ratios in experimental ecology. Journal of Marketing Research, 42(1), 67–82. A meta-analytic overview of choice overload. For example, when measuring HWTP for specialty goods, direct methods overestimate it by 28% and indirect methods do so by 40%. 2013). Journal of Marketing Research, 53(3), 297–318. We hypothesize: Giving participants the opportunity to test a product before bidding reduces the hypothetical bias. In contrast with conventional wisdom, indirect methods actually overestimate RWTP significantly stronger than direct methods. L. (2016). Second, a new product’s introductory price must be carefully chosen, because a poorly considered introductory price can jeopardize the investments in its development and threaten innovation failures (Ingenbleek et al. ), Handbook of experimental economics results (Vol. B., & De Groote, H. (2005). stream If a study only includes students, the hypothetical bias gets smaller by 11%; conducting mock auctions before measuring RWTP increases the hypothetical bias by 20%. As mentioned previously and as indicated by Table 2, we classify the moderators into four categories: (1) methods for measuring WTP, (2) research stimulus, (3) general research design of the study, and (4) the publication in which the study appears. The funnel plot for the sample, as depicted in Fig. The underlying mental processes when asked for the WTP through direct or indirect methods are not well understood yet. © 2020 Springer Nature Switzerland AG. The lack of any substantial measurement error indicates no notable influence on the statistical power of the subsequent analyses (Hallgren 2012). Econometrica, 55(6), 1275–1304. Each product features several product attributes, and each attribute offers various levels. 1994) for which the ESs (0.9079; 0.9582) exceeded the upper whisker, defined as the 75% quantile plus 1.5 times the box length. Therefore, practitioners regularly turn to HWTP during the product development process, before the final product actually exists. Specifically, the response ratio is the mean outcome in an experimental group divided by that in a corresponding control group, such that it quantifies the percentage of variation between the experimental and control groups (Hedges et al. Reliability and validity of conjoint analysis and self-explicated weights: A comparison. We used three inclusion criteria. We include this study in our meta-analysis as an example of a direct method. In the next section, we prove an overview of WTP and its different measurement options. For example, a study might measure HWTP and RWTP for several products from the same sample. Researching the differential accuracy of the various methods in a B2B context would be especially interesting; our study already indicates differences between convenience and (more complex) specialty goods. Two main types of dependencies arise between studies and ESs. Many researchers assume that direct methods create a stronger hypothetical bias, because they evoke greater price consciousness (Völckner 2006). Among the variety of indirect methods to compute WTP (Lusk and Schroeder 2004), the most prominent is choice-based conjoint (CBC) analysis. Hedges, L. V., Gurevitch, J., & Curtis, P. S. (1999). Instead, two similar questions under different conditions appear to evoke a contrast instead of an assimilation effect, and they produce a greater hypothetical bias. As Hofstetter et al. Journal of Marketing Research, 48(1), 172–184. (2013). Consumer’s Willingness to Pay: a Critical Synthesis and Directions for Further Research Marine Le Gall-Ely To cite this version: Marine Le Gall-Ely. Augmenting conjoint analysis to estimate consumer reservation price. 2012), whereas within-subject designs tend to result in stronger effects (Ariely et al. The type of experiment HWTP and type of experiment RWTP capture whether the studies measure HWTP and RWTP in field or lab experiments, respectively. How should consumers’ willingness to pay be measured? A meta-analysis of hypothetical bias in stated preference valuation. It equals “none” if the method was not introduced, “explanation” if the method and its characteristics were explained, “training” if mock auctions or questions designed to understand the mechanism occurred before the focal auction took place or questions were asked, and “not mentioned” if the study does not indicate whether the method was introduced. To measure WTP, price must be one of the attributes. Broadly speaking, WTP is a maximum amount of money the people are willing to pay for a situation where they gain a positive change. Risk Decision and Policy, 3(2), 109–123. "���t�#��=�������ޞ�0�T������8QX�'�=�%$��08��r4�D�"X�vX���m��m>�ܢ�g"5'��L��I�x�^ʮch�\x��I� �r�l �_a�[��(? Experimental evidence on the existence of hypothetical bias in value elicitation methods. All of these models are available in Web Appendix F. Though three meta-analyses discussing the hypothetical bias exist (Carson et al. Leeflang, P.S.H., Wieringa, J.E., Bijmolt, T.H.A., & Pauwels, K.H. How consumers’ willingness to pay is measured in practice: An empirical analysis of common approaches’ relevance. (2012). When researching the influence of consumer characteristics on the hypothetical bias though, it would be more appropriate to choose a within-subject design (Hofstetter et al. 2013), such that our finding of higher overestimation for specialty goods is in line with prior research. This could for example be in the context of an auction, where the winner in the end actually has to buy the product. The total sample consists of 24,347 included observations for HWTP and 20,656 for RWTP. American Journal of Agricultural Economics, 86(2), 467–482. (2013). Any inconsistent codes were resolved through discussion between the two coders. Brown, T. C., Champ, P. A., Bishop, R. C., & McCollum, D. W. (1996). This kind of question (same question text as the open-ended willingness-to-pay) asks respondents how much they’d be willing to pay for your product/service, then presents a set of possible answer options. Knowledge about a product’s willingness-to-pay on behalf of its (potential) customers plays a crucial role in many areas of marketing management like pricing decisions or new product development. To determine the factors that may influence consumers’ willingness to pay for fish welfare the binomial logit model was used. Steiner, M., & Hendus, J. 2005), this is the first comprehensive study giving marketing managers and scholars advices on how to accurately measure consumers’ WTP. In particular, managers should anticipate a greater hypothetical bias when measuring WTP for products with higher values or for specialty goods. For example, a possible explanation for the limited accuracy of indirect measures could reflect coherent arbitrariness (Ariely et al. Guidelines, criteria, and rules of thumb for evaluating normed and standardized assessment instruments in psychology. Edeling, A., & Himme, A. If the stated WTP is less than the drawn price, she or he may not buy the product. These options are ideally presented in either ascending or descending order, and typically include between four and six options. In a state-of-practice study of consumer value assessments, Anderson et al. Numerous approaches to measure willingness-to-pay with differential conceptual foundations and methodological implications have been presented in the relevant literature so far. In contrast to modeling dependence stochastically, the covariances are not estimated but rather are calculated on the basis of the provided information. We identify a student sample when the sample consists of exclusively students; mixed samples are coded as not a student sample. Treating them as independent would erroneously add RWTP to the analysis twice. $$, \( {GVIF}^{1/\left(2\ast df\right)}<\sqrt{10} \), Value does not remain in the reduced model, but the significant effect is very consistent across the robustness checks that feature the full model (Table 5). Furthermore, this result on H6 is in line with our findings for H4; both hypotheses rest on the participants’ uncertainty about product performance, and we do not find support for either of them. International Journal of Research in Marketing, 28(2), 134–144. These results could be cross-validated in future experimental studies. Thompson, S., Skiera, B. J., Allen, P. (! The direct method in Abraham and Hamilton ( 2018 ) all moderators were significant at a %! Only applies if the value of 2 has been applied by meta-analyses in R ( Viechtbauer 2010 ) the! 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