How can we best measure consumers’ willingess to pay?


This is the topic of our current research project at the Institute of Marketing and Management at the University of Bern. The exact identification of consumers’ willingness to pay (WTP) is a major challenge in applied market research. Here market researchers usually focus on cunsumers’ hypothetical willingness to pay (HWTP; i.e., no obligation of respondents to buy the respective product), which may deviate from consumers’ actual willingness to pay (AWTP). This deviation is known as the “hypothetical bias”.

Market researchers can rely on two different approaches to measure consumers’ HWTP: the indirect and the direct approach. If the researchers applies the indirect approach (e.g., conjoint measurement), then he calculates a consumer’s HWTP based on his or her preference in alternative product profiles, which vary in price and other product attributes. For the direct approach, the researcher asks consumers directly to explicitly state their HWTP.

Both approaches to measuring consumers’ HWTP come along with several advantages and disadvanteges. However, the central question for applied market researchers, when to use which approach to measure consumers’ HWTP has so far been unanswered. We will adress this issue in our future research and hope to give applied market researchers suggestions on how to best measure willingness to pay for their consumers.

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About the author: Klaus Miller is PHD candidate and working as research assistant at the Institute of Marketing of the University of Bern

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