TITLE

Estimating Willingness to Pay with Exaggeration Bias-Corrected Contingent Valuation Method

AUTHOR(S)
Joo Heon Park; MacLachlan, Douglas L.
PUB. DATE
July 2008
SOURCE
Marketing Science;Jul/Aug2008, Vol. 27 Issue 4, p691
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
Estimates of the prices customers are willing to pay for new products or services using responses from survey questionnaires are notoriously biased on the high side. An approach to obtaining more realistic estimates is suggested here, called the exaggeration bias-corrected contingent valuation method (EBC-CVM). The method is an alternative to conventional contingent valuation methods (CVMs) that have been used in economics and, to a lesser extent, in marketing. Two experiments and one field study are presented to demonstrate the effectiveness of the method. In each case, the proposed method outperformed conventional CVMs in comparison with real choices or more realistic price estimates.
ACCESSION #
34585016

 

Related Articles

  • Referendum Models and Economic Values: Theoretical, Intuitive, and Practical Bounds on Willingness to Pay. Haab, Timothy C.; McConnell, Kenneth E. // Land Economics;May98, Vol. 74 Issue 2, p216 

    Innovations in the estimation of referendum type contingent valuation models have led to willingness-to-pay (WTP) measures inconsistent with consumer preferences and unbounded from above or below. We propose a set of criteria which guarantee a bounded measure of WTP. The criteria reject the...

  • Testing willingness-to-pay models of discrete choice contingent valuation survey data. Alberini, Anna // Land Economics;Feb95, Vol. 71 Issue 1, p83 

    This paper considers models of willingness to pay (WTP) based on dichotomous choice contingent valuation survey data and examines the effect of the survey design on tests of goodness of fit. Simulations show that eliciting single binary responses result in tests that have low power in detecting...

  • Effects of Cheap Talk on Consumer Willingness-to-Pay for Golden Rice. Lusk, Jayson L. // American Journal of Agricultural Economics;Nov2003, Vol. 85 Issue 4, p840 

    A large body of literature suggests willingness-to-pay is overstated in hypothetical valuation questions as compared to when actual payment is required. Recently, �cheap talk� has been proposed to eliminate the potential bias in hypothetical valuation questions. Cheap talk refers to...

  • Diagnosis--The Handmaiden of Prediction. Yuspeh, Sonia // Journal of Marketing;Jan1975, Vol. 39 Issue 1, p87 

    The article presents a method for predicting the market performance of a product that is still in the idea phase of development. The author describes the current methods for performing this task, those being predictive or concept testing and diagnostic or need/satisfaction testing. Most people...

  • Induced-Value Tests of Contingent Valuation Elicitation Mechanisms. Vossler, Christian; McKee, Michael // Environmental & Resource Economics;Oct2006, Vol. 35 Issue 2, p137 

    Using an induced-value experimental design that varies whether values for a “good” are certain or uncertain and whether payment is real or hypothetical, this study investigates issues of demand revelation, hypothetical bias, and value uncertainty for four elicitation mechanisms used...

  • Economic Valuation of the Environment: How Citizens Make Sense of Contingent Valuation Questions. Svedsäter, Henrik // Land Economics;Feb2003, Vol. 79 Issue 1, p122 

    This study adopts a qualitative approach in order to investigate how people make sense of contingent valuation (CV) questions of a global environmental amenity. The objective is not only to capture people's motivations and considerations of willingness to pay (WTP), but also to determine if they...

  • CVM Embedding Effects When There Are Active, Potentially Active and Passive Users of Environmental Goods. DUPONT, DIANE P. // Environmental & Resource Economics;Jul2003, Vol. 25 Issue 3, p319 

    Embedding is said to occur when the willingness-to-pay (WTP) values for a good differ according to whether the good is valued on its own or as part of a package of goods. It can manifest itself as a question order or sequencing effect whereby the WTP for a good depends upon the order in which...

  • How do respondents explain WTP responses? A review of the qualitative evidence. Baker, Rachel; Robinson, Angela; Smith, Richard // Journal of Socio-Economics;Aug2008, Vol. 37 Issue 4, p1427 

    Abstract: Alongside a growing body of empirical research relating to willingness to pay (WTP) valuations of the environment, health and safety, there is mounting evidence of embedding, framing effects and other anomalies in responses. Gaining an understanding into how respondents arrive at WTP...

  • Varying levels of information and the embedding problem in contingent valuation: the case of Canadian wilderness Macdonald, Heather; McKenney, Daniel // Canadian Journal of Forest Research;Jul1996, Vol. 26 Issue 7, p1295 

    No abstract available.

Share

Read the Article

Courtesy of THE LIBRARY OF VIRGINIA

Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics