The Suitability of WTP Measurement Approaches for Pricing Decision Making

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A precise knowledge of consumers’ willingness to pay (WTP) is instrumental for pricing decision making. Market researchers can choose among a variety of methods to determine WTP. However, prior literature provides little guidance on the choice of the appropriate measurement instrument. In our study among 1,124 consumers, we address this research deficit and assess four state-of-the-art approaches to measure consumers’ WTP with regard to their external validity and suitability for pricing decision making. Specifically, we compare the open-ended question format, conjoint analysis, the BDM mechanism, incentive-aligned conjoint-analysis, and real purchase data. Our results can guide market researchers to select an appropriate WTP measurement approach for their business decisions (e.g., setting the profit-maximizing price).

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