design and analysis of simulated consumer choice or allocation experiments an approach based on aggregate data the authors integrate concepts in conjoint analysis and discrete choice theory in econometrics to develop a new approach to the design and analysis of controlled consumer choice or resource allocat

competitive coupon targeting with the advent of panel data on household purchase behavior and the development of statistical procedures to utilize this data firms can now target coupons to selected households with considerable accuracy and cost effectiveness in this article we develop an analytical framework to examine the effect of such targeting on firm profits prices and coupon face values we also derive comparative statics on firms optimal mix of offensive and defensive couponing the number of coupons distributed redemption rates face values and incremental sales per redemption among our findings when rival firms can target their coupon promotions at brand switchers the outcome will be a prisoner s dilemma in which the net effect of targeting is simply the cost of distribution plus the discount given to redeemers

models for referendum data the structure of discrete choice models for contingent valuation abstract in 1979 bishop and heberlein introduced an appealing variant of the contingent valuation method which required only yes or no responses hanemann developed a utility theoretic interpretation of the yes no responses which has helped popularize the approach recently cameron has offered another interpretation also utility theoretic which she argues is more general than the hanemann random utility model this paper compares the deterministic models suggested by hanemann and cameron showing them to be dual to each other it shows that correct specification of either function must exclude endogenous variables such as quantity demanded it also demonstrates that using utility theoretic models allows one to compare travel cost models and contigent valuation models on the basis of their implied behavior not on the unobservable surplus or variation measure

an incentive aligned mechanism for conjoint analysis abstract this article specifies analyzes and validates a rigorous and practical truth telling mechanism game for conjoint applications the mechanism requires only one real product variation and has truth telling in conjoint as its bayesian nash equilibrium thus making it possible to incentive align participants in most conjoint applications using the ipod package as the context the author shows empirically that the mechanism substantially improves purchase prediction compared with a standard conjoint procedure

on the estimation of demand systems through consumption efficiency we consider a bayesian implementation of a new approach to estimating demand systems this approach suggested by varian 1990 is based on a generalization of afriat s 1967 e ciency index the model we propose leads to a very tractable posterior and predictive analysis yet allows for interesting economic interpretations we conduct a sensitivity analysis with respect to the prior in an application to annual aggregate u s consumption data and conclude that the sample is quite informative average e ciency and expected budget shares are examined in some detail

estimating willingness to pay from survey data an alternative pre test market evaluation procedure closed ended contingent valuation surveys are used to assess demands in hypothetical markets and recently have been applied widely to the valuation of non market environmental resources this int

estimating the public good value of preserving a local historic landmark the role of non substitutability and citizen information this study applies stated preference methods to estimate the public good values of preservation and restoration of a local historic landmark in a medium sized us city the survey device centres on

measuring heterogeneous reservation prices for product bundles this paper develops a model for capturing continuous heterogeneity in the joint distribution of reservation prices for products and bundles our model is derived from utility theory and captures both within and among subject variability furthermore it provides dollarmetric reservation prices and individual level estimates that allow the firm to target customers and develop customized and nonlinear pricing policies our experiments show that regardless of whether the products are durables or nondurables the model captures heterogeneity and predicts well models that assume homogeneity perform poorly especially in predicting choice of the bundle furthermore the methodology is robust even when respondents evaluate few profiles self stated reservation prices do not have any informational content beyond that contained in the basic model the direct elicitation method appears to understate overstate the variation in reservation prices across consumers for low priced high priced products and bundles hence this method yields biased demand estimates and leads to suboptimal product line pricing policy the optimization results show that the product line pricing policy depends on the degree of heterogeneity in the reservation prices of the individual products and the bundle a uniformly high price strategy for all products and bundles is optimal when heterogeneity is high otherwise a hybrid strategy is optimal

study on benefit transfer in an international setting how to improve welfare estimates in the case of the countries income heterogeneity abstract the paper aims at investigating the validity of benefit transfer in the case of transfers between countries highly heterogeneous in income and demonstrates relative performance of different benefit transfer methods under these conditions lake water quality valuation studies were conducted in two countries in transition poland and the czech republic they reflected two earlier studies carried out in norway we examine how income elasticity of wtp varies with the levels of income and find support for applying the income elasticity of 1 to adjust transferred welfare estimates in case of high differences in income between countries in addition we show that using site specific measures of income outperforms transfers based on gpd per capita the accuracy of benefit transfer is compared using equivalence testing following the tosc two one sided convolutions test a new more informative way of reporting equivalence is proposed based on computing minimum tolerance level rather than specifying it a priori

the concept of quality and the efficiency of markets for consumer products can consumers trust prices to be good quality indicators previous studies based on quality data from consumer reports have indicated that the relation of price to overall quality is quite weak this paper demonstrates that these studies are methodologically invalid by showing that the concept of overall quality has many dimensions to what extent do inefficient variants occur in the market previous studies have suggested that there is a considerable degree of inefficiency in the market alternative calculations imply that inefficient variants are in fact frequent but that the loss to consumers is much lower than previously suggested

treatment of don t know responses in contingent valuation surveys a random valuation model abstract this paper provides a utility theoretic interpretation of don t know dk responses in contingent valuation surveys using a referendum elicitation procedure the random valuation model in this paper assumes that each respondent of a contingent valuation survey has an implicit valuation distribution rather than a single true value as traditionally assumed in his her mind if an offered referendum bid is not clearly different from the mean value of one s valuation distribution the respondent may give a dk answer to the cv referendum question based on this model a maximum likelihood procedure is proposed for estimating respondents willingness to pay for a nonmarket good with referendum contingent valuation data which include dk responses an empirical illustration of this estimation procedure is also provided

the exponomial choice model a new alternative for assortment and price optimization we investigate the use of a canonical version of a discrete choice model due to daganzo 1979 daganzo c 1979 multinomial probit the theory and its application to demand forecasting academic press new york in optimal pricing and assortment planning in contrast to multinomial and nested logit the prevailing choice models used for optimizing prices and assortments this model assumes a negatively skewed distribution of consumer utilities an assumption we motivate by conceptual arguments as well as published work the choice probabilities in this model can be derived in closed form as an exponomial a linear function of exponential terms the pricing and assortment planning insights we obtain from the exponomial choice ec model differ from the literature in two important ways first the ec model allows variable markups in optimal prices that increase with expected utilities second when prices are exogenous the optimal assortment may exhibit leapfrogging in prices i e a product can be s

do reminders of substitutes and budget constraints influence contingent valuation estimates a test is performed of the recommendation by the noaa panel on contingent valuation that respondents be reminded about other substitute resources and their budget constraint prior to answering the willingness to pay wtp question the context for this experiment is a cvm study of the benefits from reducing fire hazards to old growth forests in oregon the test was performed using two mail surveys that were otherwise identical except for the inclusion of reminder statements prior to the wtp question the dichotomous choice logit equations were not statistically different between versions and the mean wtp results were identical

local identification and valuation of ecosystem goods and services from opuntia scrublands of ayacucho peru abstract opuntia scrublands are important ecological economic systems in the andean area they perform a major role protecting slopes against erosion improving the soil properties and providing a variety of products employed in the human diet and in animal feeding as well as cochineal insects a highly valued source of dyes the collection of the insects has represented an important economic activity for the local communities since pre columbian times current peruvian production represents between 85 and 90 of the global market and is mainly based on collection of the insect in natural opuntia scrublands located in the poorest andean areas of ayacucho although much is known about the financial benefits of cochineal for exporters and dye manufacturers information about the value of standing opuntia scrubs to collectors and the relative contribution of opuntia scrubs to their household economies is scarce here we contribute to the estimation of the use value of opuntia scrublands to local communities in ayacucho by initially exploring the cultural domain of opuntia in order to identify the ecosystem goods and services recognized by peasants and later presenting empirical estimates of their importance to annual household income

can contingent valuation distinguish economic values for oifferent public goods this paper reports the first test eval uating whether stated choices as part of a contin gent valuation survey discriminate between signifi cant and trivial causes using a random digit dialed sample for north carolina two different plans were posed to respondents one to expand a popular north carolina highway flower planting program nationwide and a second to facilitate the use of recycled tires in making asphalt for highways ran dom assignment identical payment mechanisms and overall question designs were used the results indicate clear discrimination in choices choice functions and the estimated willingness to pay for the two plans jel q26 d71

using labels to investigate scope effects in stated preference methods insufficient sensitivity to scope variations in the scale of the environmental good on offer remains a major criticism of stated preference methods and many studies fail a scope test of some sort across a range of existing explanations for insensitivity to scope commodity mis specification embedding warm glows there seems to exist no clear conclusion on how to deal with the problem this paper provides an alternative explanation for insufficient sensitivity to scope based on re definition of the determinants of value for environmental goods within an attributes based choice model in the proposed framework respondents willingness to pay need depend not only on physical characteristics of a good but may also depend on the label under which the environmental good is sold in the hypothetical market to investigate this problem a choice experiment study of biodiversity was conducted we find that controlling for the effects of a label in this case national park designation leads to significant increase in the scope sensitivity of welfare measures

a satisfactory benefit cost indicator from contingent valuation abstract standard economic concepts are used to develop a model of individual behavior when subject to the constraints of the contingent valuation choice context the model yields refutable consequences that are consistent with previously reported empirical findings including some that have been thought to be anomalous the model is used to show that different contingent valuation formats have predictably different performance characteristics notably the hicksian compensating measures are satisfactory benefit cost indicators when elicited using any one of several formats identified in the text of the formats examined one form of a policy referendum appears to have the most satisfactory characteristics overall we conclude that contingent valuation is a progressing research program

specification of the logit model the case of valuation of nonmarket goods abstract we address the proper specification of the logit model for estimation of nonmarket commodity demand economic theory is used to show the conditions which must be met by the logit functional form if it is to yield valid estimates of welfare change measures and demand relationships an empirical example is used to illustrate the argument recreational boating data were collected using the contingent valuation method cvm in texas in one instance the demand curve is positively sloped due to the specific functional form chosen the estimated demand curve for the theoretically preferred functional form has the expected negative slope

independent private value auctions bidder behaviour in first second and third price auctions with varying numbers of bidders the symmetric equilibrium of third price auctions is characterized it makes a number of contrasting predictions relative to firms and second price auctions bids exceed private values the marginal effects on bids of an increase in private values is greater than one increasing numbers of bidders reduces bids and risk aversion requires bidding below the risk neutral nash equilibrium in the experiment bidders do not always satisfy the point predictions of the theory however the game theoretic models correctly anticipate at least directionally the important effects of the price rule changes copyright 1993 by royal economic society

incentive aligned conjoint analysis abstract because most conjoint studies are conducted in hypothetical situations with no consumption consequences for the participants the extent to which the studies are able to uncover true consumer preference structures is questionable experimental economics literature with its emphasis on incentive alignment and hypothetical bias suggests that more realistic incentive aligned studies result in stronger out of sample predictive performance of actual purchase behaviors and provide better estimates of consumer preference structures than do hypothetical studies to test this hypothesis the authors design an experiment with conventional hypothetical conditions and parallel incentive aligned counterparts using chinese dinner specials as the context the authors conduct a field experiment in a chinese restaurant during dinnertime the results provide strong evidence in favor of incentive aligned choice conjoint analysis in that incentive aligned choice conjoint outperforms hypothetical choice conjo

reservation price as a range an incentive compatible measurement approach abstract drawing from the literature on buyers uncertainty in preference and product knowledge the authors suggest and empirically test the proposition that a consumer s reservation price for a product is more meaningfully and accurately represented as a range than as a single point given this conceptualization they propose an approach for incentive compatible elicitation of a consumer s reservation price range icerange that builds on becker degroot and marschak s 1964 point of purchase method two empirical applications of the approach provide an assessment of its practicality and its predictive performance relative to current methodologies for reservation price elicitation the results demonstrate that the proposed method significantly outperforms the benchmark approaches in terms of predictive validity and yields valuable incremental information about uncertainty in product valuation

how should consumers willingness to pay be measured an empirical comparison of state of the art approaches abstract this study compares the performance of four commonly used approaches to measure consumers willingness to pay with real purchase data real the open ended oe question format choice based conjoint cbc analysis becker degroot and marschak s bdm incentive compatible mechanism and incentive aligned choice based conjoint icbc analysis with this five in one approach the authors test the relative strengths of the four measurement methods using real as the benchmark on the basis of statistical criteria and decision relevant metrics the results indicate that the bdm and icbc approaches can pass statistical and decision oriented tests the authors find that respondents are more price sensitive in incentive aligned settings than in non incentive aligned settings and the real setting furthermore they find a large number of none choices under icbc than under hypothetical conjoint analysis this study uncovers an intriguing possibility even when the oe format and cbc analysis generate

are choice experiments incentive compatible a test with quality differentiated beef steaks this study compares hypothetical and nonhypothetical responses to choice experiment questions we test for hypothetical bias in a choice experiment involving beef ribeye steaks with differing quality attributes in general hypothetical responses predicted higher probabilities of purchasing beef steaks than nonhypothetical responses thus hypothetical choices overestimate total willingness to pay for beef steaks however marginal willingness to pay for a change in steak quality is in general not statistically different across hypothetical and actual payment settings

measuring market efficiency and welfare loss this study presents a general methodology capable of addressing a number of fundamental questions in consumer policy are consumers paying more than the minimum price for a given bundle of attributes if so what brands cost more than the consumer needs to pay what would be the degree of improvement in the consumer s well being if some intervention sets the price of such inefficient brands at the efficient level we apply the methodology to data on atuomobiles and several other goods and analyze the determinants of efficiency

augmenting conjoint analysis to estimate consumer reservation price consumer reservation price is a key concept in marketing and economics theoretically this concept has been instrumental in studying consumer purchase decisions competitive pricing strategies and welfare economics managerially knowledge of consumer reservation prices is critical for implementing many pricing tactics such as bundling tar get promotions nonlinear pricing and one to one pricing and for assessing the impact of marketing strategy on demand despite the practical and theoretical importance of this concept its measurement at the individual level in a practical setting proves elusive we propose a conjoint based approach to estimate consumer level reservation prices this approach integrates the preference estimation of traditional conjoint with the economic theory of consumer choice this integration augments the capability of traditional conjoint such that consumers reservation prices for a product can be derived directly from the individuallevel estimates of conjoint coefficients with this augmentation we can model a consumer s decision of not only which product to buy but also whether to buy at all in a category thus we can simulate simultaneously three effects that a change in price or the introduction of a new product may generate in a market the customer switching effect the cannibalization effect and the market expansion effect we show in a pilot application how this approach can aid product and pricing decisions we also demonstrate the predictive validity of our approach using data from a commercial study of automobile batteries

confidence intervals for evaluating benefits estimates from dichotomous choice contingent valuation studies i evaluate the potential usefulness of nonmarket valuation concepts and techniques from environmental economics for improving wildlife conservation the concepts include distinguishing between on site recreation use value and off site passive use or

two new features in discrete choice experiments to improve willingness to pay estimation that result in sdr and sadr separated adaptive dual response discrete choice experiments such as choice based conjoint and dual response are popular preference elicitation methods yet they can suffer from context effects extreme response behavior and problems with estimating consumers willingness to pay accurately when the purchase probability is high this study proposes two new features to avoid these limits a strictly separating all forced and all free choice questions and b an adaptive mechanism to select fewer but more informative free choice questions the use of these two features invokes two new discrete choice experiment methods separated dual response sdr with just the first feature and separated adaptive dual response sadr with both features a conceptual comparison simulation study tests to address endogeneity concerns and three empirical studies demonstrate the appeal of these two new features relative to the benefits of existing discrete choice experiments especially when estimating willingness to pay data as supplemental material are available at http dx doi org 10 1287 mnsc 2015 2367 this paper was accepted by pradeep chintagunta marketing

alternative approaches for incorporating respondent uncertainty when estimating willingness to pay the case of the mexican spotted owl abstract this paper explores the sources and patterns of respondents uncertainty regarding their willingness to pay wtp and presents alternative approaches for incorporating this uncertainty into estimation of the logit model recently proposed approaches are compared to methods proposed in this paper which allows for incorporation of uncertainty regarding both yes and no responses these approaches are evaluated by comparing the goodness of fit and variability of mean wtp extreme recoding of uncertain yes responses as no responses reduces the logit goodness of fit and the precision of the wtp estimate incorporating the degree of uncertainty of yes responses results in the highest goodness of fit and the smallest variability of mean wtp among the various models addressing uncertainty a regression model is used to determine the significant determinants of respondent uncertainty

do non monetary prices target the poor evidence from a field experiment in india monetary price subsidies are often used to increase take up of health products but monetary prices may screen out those with the highest returns the poor using willingness to pay wtp data from a field experiment in india this paper determines whether nonmonetary prices better target health products to the poor than monetary prices it is found that monetary wtp is increasing in income and nonmonetary wtp is weakly decreasing in income comparing across price types nonmonetary wtp falls relative to monetary wtp as income rises nonmonetary prices better target the poor than monetary prices a larger fraction of total demand is poor

eliciting and utilizing willingness to pay evidence from field trials in northern ghana we utilize the becker degroot marschak 1964 mechanism to estimate the willingness to pay for clean drinking water technology in northern ghana the bdm mechanism has attractive properties for empirical research allowing us to directly estimate demand compute heterogeneous treatment effects and study the screening and causal effects of prices with minor modifications to a standard field experiment setting we demonstrate the implementation of bdm along these three dimensions compare it to the standard take it or leave it method for eliciting willingness to pay and discuss practical issues for implementing the mechanism in true field settings jel classifications c93 d12 d82 l11 l31

a theory of dynamic oligopoly ii price competition kinked demand curves and edgeworth cycles we provide game theoretic foundations for the classic kinked demand curve equilibrium and edgeworth cycle we analyze a model in which firms take turns choosing prices the model is intended to capture the idea of reactions based on short run commitment in a markov perfect equilibrium mpe a firm s move in any period depends only on the other firm s current price there are multiple mpe s consisting of both kinked demand curve equilibria and edgeworth cycles in any mpe profit is bounded away from the bertrand equilibrium level we show that a kinked demand curve at the monopoly price is the unique symmetric renegotiation proof equilibrium when there is little discounting we then endogenize the timing by allowing firms to move at any time subject to short run commitments we find that firms end up alternating thus vindicating the ad hoc timing assumption of our simpler model we also discuss how the model can be enriched to provide explanations for excess capacity and market sharing keiiwords tacit collusion markov perfect equilibrium kinked demand curve edgeworth cycle excess capacity market sharing endogenous timing

a reservation price model for optimal pricing of multiattribute products in conjoint analysis a significant application of conjoint analysis is in pricing decisions for new products conceptually profit maximization is an important criterion for selecting the price of a product however t

choice modeling and tests of benefit transfer choice modelling cm is a stated preference technique that is increasingly being used to generate estimates of non market values in cm applications respondents to a survey are presented with several sets of options which contain common attributes but at varying levels and are asked to select their preferred alternative from each set the information provided by respondents choices is used to estimate marginal rates of substitution and hence estimates of value in this paper the results from three separate cm applications are presented estimates are made of the value of improving the quality of wetlands the first two applications focused on the gwydir wetlands in new south wales australia one survey was conducted in sydney a major urban centre and the second was conducted in moree a rural centre close to the gwydir wetlands the third survey which was also conducted in sydney focused on the macquarie marshes another wetland in new south wales an objective of the study was to test the suitability of using cm derived estimates for benefit transfer both across different populations and across different wetlands cm is potentially suited to benefit transfer because it is possible to allow for differences in environmental improvements between sites as well as differences in socio economic characteristics between respondent populations several tests aimed at determining the validity of transfers using cm across sites and populations are presented these include tests of the equality of models implicit prices and estimates of compensating surplus

testing a model of the kinked demand curve this paper analyzes survey data on the responses firms expect from their competitors when they change prices there is evidence of an assymmetry in expected responses which provides some support for modified versions of the kinked demand curve the asymmetry in responses is found to be cyclically sensitive and to differ with certain firm characteristics copyright 1991 by blackwell publishing ltd

comparative analysis of non market valuation techniques for the eduardo avaroa reserve bolivia abstract ecological tourism has held up as a potentially important development alternative in relatively undeveloped regions and countries however tourism is a highly vulnerable activity where tourists display voluntary and discretionary behavior while tourism can serve as an income generating activity for the region uncontrolled tourism that is developed without consideration of the environmental impact can adversely affect the natural areas determining what to charge tourists to view a natural area is difficult since demand elasticities are not readily available from observable transactions in order to better gauge the value tourists place on the reserve and their sensitivity to changes in the costs of visiting eduardo avaroa non market valuation provides several valuable tools here we test the convergent validity between two popular non market valuation alternatives the contingent valuation method and the contingent behavior method tourists to the eduardo avaroa reserve in bolivia were asked their willingness to pay in visitor days or in dollars due to an improvement in tourism services at the reserve our models show that the traditionally important variables predict willingness to pay for improved services for the contingent behavior contingent valuation and the pooled model however we find statistically and empirically meaningful distinctions in the estimates derived from the two methods comparisons of the implications of adopting the entrance fee recommendations from the two non market valuation techniques are made based on the revenues predicted to accrue to eduardo avaroa reserve if park management techniques were improved this research highlights the challenges in using non market valuation techniques for policy formation particularly in a developing country setting

actual averting expenditure versus stated willingness to pay the purpose of this study is to perform a complete comparison of actual averting expenditure and stated willingness to pay measures and to determine if the averting expenditure is a lower bound of the willingness to pay measured from contingent valuation experiment as suggested by literature in addition to the single value comparison bootstrap krinsky and robb jackknife and cameron are four simulation methods used to calculate confidence intervals for response function sample sizes of 100 200 and 1000 are simulated 100 and 200 times respectively a set of data with 540 households from a contingent policy referendum survey is employed for our purpose under a specific level of bod improvement a one to one single mean value comparison of the actual averting expenditure is greater than the mean willingness to pay from utility difference model the empirical results are consistent with the theoretical expectation for expenditure difference that averting expenditure is a lower bound of willingness to

the public value of improving a weather forecasting system in korea a choice experiment study abstractthe korean government plans to improve the quality of its weather forecasting system in order to increase its public utility the benefits arising from the implementation of this plan shoul

environmental choices and hyperbolic discounting an experimental analysis environmental goods such as carbon abatement or green space development often generate benefit streams that may not occur until far into the future how individual consumers value such amenities therefore depends critically on the discount rate the usual assumption is that agents discount future values using constant exponential rate but there is some evidence from the lab suggesting that discount functions are more likely quasi hyperbolic we compare estimates of subjects rate of intertemporal time preference for financial rewards and environmental goods using multiple price list and a new matrix multiple price list approaches our objective is to determine if discount functions for environmental and monetary goods differ and to estimate the structure of discounting in both contexts we find that financial discount functions are not hyperbolic but those for environmental goods are discount rates for environmental goods are generally lower than for financial rewards but are still above zero consumers therefore value long lived environmental goods differently than financial goods

the impact of deal proneness on wtp estimates in incentive aligned value elicitation methods even after controlling for hypothetical biases some incentive aligned value elicitation methods still produce different willingness to pay wtp estimates in this study we compare wtp estimates from three incentive aligned value elicitation methods real choice experiment rce real double bounded dichotomous contingent valuation rcvm and becker degroot marschak auction bdm we find that participants aggressiveness in obtaining low prices i e deal proneness influences wtp estimates in the bdm auction but not those elicited from the rce and rcvm the participants with higher levels of deal proneness tend to submit lower bids in the bdm auction the discrepancies in wtp estimates between different incentive aligned procedures are narrower for participants with lower levels of deal proneness our results indicate that the bids in bdm auctions may be understated and the auction mechanism may induce the gambling behavior of people who are deal prone that is whether the bdm auction is truly incentive aligned is again called into question we also discuss the practical implications for food retailers

language related differences in a contingent valuation study english versus spanish to test the similarity of english and spanish speaking households responses to a contingent valuation survey phone interviews were conducted in both languages regarding two forest fire prevention programs while there were similar response rates there were significant differences in the most frequent reasons given for refusing to pay in the pooled logit model the language intercept and bid interaction variables were insignificant in both programs the likelihood ratio test of separate logit equations showed no statistical difference between english and spanish speaking households responses to either program mean benefits reported by spanish speaking households were about one third lower than english speaking households although the difference is not statistically significant according to the 1990 census more than 32 million adults in the united states speak a language other than english in their home and these multiracial populations are growing faster than the english speaking population in many states according the bureau of census from 1990 to 1999 the hispanic population grew by 39 in the united states in states such as arizona california florida and texas hispanics are a large and rapidly growing segment of the population many in the hispanic population either do not speak english or are more fluent in spanish than in english executive order 12898 by president clinton requires federal agencies to evaluate environmental justice of federal actions on minority populations under this executive order policy makers are charged with the daunting

on consumer preferences and the willingness to pay for term life insurance abstract we run a choice based conjoint cbc analysis for term life insurance on a sample of 2017 german consumers using data from web based experiments individual level part worth profiles are estimated by means of a hierarchical bayes model drawing on the elicited preference structures we then compute relative attribute importances and different willingness to pay measures in addition we present comprehensive simulation results for a realistic competitive setting that allows us to assess product switching as well as market expansion effects on average brand critical illness cover and underwriting procedure turn out to be the most important nonprice product attributes hence if a policy comprises their favored specifications customers accept substantial markups in the monthly premium furthermore preferences vary considerably across the sample while some individuals are prepared to pay relatively high monthly premiums a large fraction exhibits no willingness to pay for term life insurance at all presumably due to the absence of a need for mortality risk coverage we also illustrate that utility driven product optimization is well suited to gain market shares avoid competitive price pressure and access additional profit potential finally based on estimated demand sensitivities and a set of cost assumptions it is shown that insurers require an in depth understanding of preferences to identify the profit maximizing price

the kinked demand curve a game theoretic approach in a simple model of duopoly firms price moves are modelled as an extensive form game where firms can respond to undercutting without delay when firms are not too dissimilar kinked demand strategies enforcing an arbitrary price may be nash equilibria however these strategies are dominated and perfect equilibrium is unique at the minimum optimal common price rather than implying price rigidity kinked demand strategies are a device for ensuring compliance with a collusive price leadership

measuring consumers willingness to pay at the point of purchase abstract economists psychologists and marketing researchers rely on measures of consumers willingness to pay wtp in estimating demand for private and public goods and in designing optimal price schedules existing market research techniques for measuring wtp differ in whether they provide an incentive to consumers to reveal their true wtp and in whether they simulate actual point of purchase contexts the authors present an empirical comparison of several procedures for eliciting wtp that are applicable directly at the point of purchase in particular the authors test the applicability of becker degroot and marschak s 1964 well known incentive compatible procedure for assessing the utility of lotteries to measuring consumers wtp in three studies the authors explore the reliability validity and feasibility of the procedure and show that it yields lower wtp estimates than do non incentive compatible methods such as open ended and double bounded contingent valuation they show experimentally t

kinked norms of behaviour and cooperation this paper revisits a particular norm of behaviour underlying the well known model of kinked demand we show that under some standard regularity conditions this norm of behaviour sustains the efficient outcome in all symmetric games

consumers perceptions preferences and willingness to pay for wine with sustainability characteristics a review abstract the aim of this review article is to identify the state of the art and research gaps in consumer perceptions preferences and willingness to pay wtp towards wine with sustainability characteristics in an effort to cover all relevant literature we searched for scientific articles published between january 2000 and march 2016 the search resulted in 34 articles which were analysed in detail to assess the reviewed articles the alphabet theory which is a framework for explaining environmentally significant behaviour was used the review differentiates the results for consumers wine choice by the type of production method e g sustainable environmental friendly organic or local a considerable number of consumers across different countries had positive perceptions regarding these different production methods and reported a willingness to pay a premium for wine with characteristics of sustainable production however on average consumers awareness of the broad concept of sustainability regarding wine seemed low in some european countries and north america in particular organic and sustainability labels were often perceived as quality indicators in most cases the studies focused on the environmental aspects of sustainability environmental soundness was given most often as a determining factor in purchase decisions regarding wine with characteristics of sustainable production overall social and economic aspects were only just examined the results suggest that producing and marketing wine with sustainability characteristics is a promising strategy for quality differentiation particularly for wine that is both local and organic moreover marketers retailers and producers will likely profit from developing information campaigns with a focus on environmental as well as social and economic aspects to increase consumers knowledge of sustainable wine production thus creating preferences and influencing purchase behaviour gaining a deeper understanding of consumers attitudes and their buying motives regarding different sustainability attributes is recommended for future studies since none of the articles examined purchase behaviour in real market scenarios with real market transactions future research should focus for example on the analysis of household panel data as evidence of an attitude behaviour gap was found

the effect of common sources of regression error on benefit estimates discussions of the sources of error in recreation demand analysis are common in the existing literature the most traditional line of thought e g gum and martin considers the error component in predicting the individual s recreation behavior to arise from unmeasured socioeconomic factors others e g hanemann attribute at least some of this error to fundamental randomness in human behavior applied statisticians e g hiett and worrall on the other hand suggest that recall of annual number of recreational trips i e the quantity demanded is subject to substantial error still others e g brown et al have argued that recall of explanatory variables such as travel expenses contains error despite the discussion of potential error sources there is no work which relates the sources of error in the demand relationship with benefit measurement 1 of practical importance in recreational demand estimation is whether error assumptions have an influence on welfare measures since it is for public policy decision purposes that recreational demand estimation is usually undertaken will the estimated consumer surplus derived from demand analysis be independent of the assumed source of the error in the regression the purpose of this paper is to explore how the assumptions about sources of error influence estimates of recreation benefits a discussion of the various sources of error in de

a conjoint model of quantity discounts quantity discount pricing is a common practice used by business to business and business to consumer companies a key characteristic of quantity discount pricing is that the marginal price declines with higher purchase quantities in this paper we propose a choice based conjoint model for estimating consumer level willingness to pay wtp for varying quantities of a product and for designing optimal quantity discount pricing schemes our model can handle large quantity values and produces wtp estimates that are positive and increasing in quantity at a diminishing rate in particular we propose a tractable wtp function that depends on both product attributes and product quantity and that captures diminishing marginal wtp we show how such a function embeds standard wtp functions in the quantity discount literature as special cases we also demonstrate how to use the model to estimate the consumer value potential which is the product of the premium a consumer is willing to pay and her volume potential finally we propose a parsimonious experimental design approach for implementation we illustrate the model using data from a conjoint study of online movie rental services the empirical results show that the proposed model has good fit and predictive validity in addition we find that marginal wtp in this category decays rapidly with quantity we also find that the standard choice based conjoint model results in anomalous wtp distributions with negative wtp values and nondiminishing marginal willingness to pay curves finally we identify four segments of consumers that differ in terms of magnitude of wtp and volume potential and we derive optimal quantity discount schemes for a monopolist and a new entrant in a competitive market

paired comparison estimates of willingness to accept versus contingent valuation estimates of willingness to pay estimating empirical measures of an individual s willingness to accept that are consistent with conventional economic theory has proven difficult the method of paired comparison offers a promising approach to estimate willingness to accept this method involves having individuals make binary choices between receiving a particular good or a sum of money willingness to accept can be inferred from the ranking of dollar amounts and the good of interest using the paired comparison approach mean median willingness to accept for a private good is estimated at 59 52 contingent valuation estimate of willingness to pay for the same good yields a mean median of 28 28 while these estimates are statistically different the ratio of willingness to accept to willingness to pay is less than in most previous studies and closer to ratios found in actual cash experiments

measuring consumption efficiency with utility theory and stochastic frontier analysis the concept of production efficiency has been studied since the 1960s but consumption activity as well may be inefficient for various reasons such as product complexity lack of information the bounded rationality of the consumer and imperfect markets to name a few this study proposes a conceptual framework for measuring the consumption efficiency of differentiated products based on traditional utility theory it employs stochastic frontier analysis sfa in an empirical analysis it makes use of hedonic price theory to link traditional utility theory and the sfa framework when the developed model is applied to the korean personal computer market empirical results indicate the levels and distribution of consumption efficiency in that market the findings afford us a better understanding of the characteristics of the innovation process in that market

estimation of a hedonic price equation for burgundy wine a hedonic price equation and two jury grade equations are estimated for burgundy wine the approach is the same as in an earlier bordeaux wine paper combris et al 1997 the data come from an experimental study that is very similar to the study on bordeaux wines the results for the two wine growing regions are compared and discussed

relating environmental attitudes and contingent values how robust are methods for identifying preference heterogeneity we assess the importance and robustness of cluster analysis and latent class analysis as methods to account for unobserved heterogeneity we provide a critique and comparison of both methods in the context of measuring environmental attitudes and a contingent valuation study involving endangered species we find strong evidence of robustness for these methods group characterization and assignment of individuals to groups are similar between methods and willingness to pay estimates are consistent in addition there are significant differences in willingness to pay across environmental attitudinal groups and we find that accounting for unobservable heterogeneity provides a significantly better fitting model

will they buy it the potential for marketing organic vegetables in the food vending sector to strengthen vegetable safety a choice experiment study in three west african cities abstract considering the hazardous use of synthetic pesticides in vegetable production in urban west africa this research investigated the marketing potential of organic vegetables in the food vending sector of cotonou benin accra ghana and ouagadougou burkina faso certified organic production and marketing was examined as a potential strategy to improve chemical food safety a stratified random sampling strategy was applied to study the preferences of food vendors n 180 and consumers n 360 vegetable use risk perception choice preferences and willingness to pay wtp for organic certification were specifically analyzed the results showed that awareness of chemical contamination risks was generally low appearance of a product was central to vendor choice consumers attributed similar utility to taste and organic certification consumer wtp was calculated to be a premium of 1 04 usd per plate if the food served contained only certified organic vegetables in restaurants this would mean an average premium of 19 for a meal if certified organic vegetable production is to make a positive impact on food safety in urban west africa we suggest concentrating marketing efforts on the educated elite who frequent restaurants however considering that restaurant owners exhibited a lower preference for organic certification than lower class food vendors the marketing situation is difficult we therefore conclude that demand from the food vending sector alone will not institutionalize domestic certification mechanisms this underlines the need for public commitment to facilitating such change

whatever the customer wants the customer gets exploring the gap between consumer preferences and default electricity products in germany abstract in liberalized electricity markets residential customers can choose their preferred provider and select among a variety of different electricity products including green power options successful product design and marketing strategies for green electricity may provide electricity providers with a competitive advantage while at the same time contributing to energy policy objectives this requires however a thorough understanding of customer preferences we investigate the relative importance of different product attributes in creating customer value and find that price and electricity mix are the two most important attributes the german electricity customers we surveyed in 2009 expressed an implicit willingness to pay a premium of about 16 for electricity from renewable sources we conclude that consumers are willing to pay a significant price premium for an upgrade from the current default electricity mix in germany to a more environmentally friendly default electricity mix and discuss implications for marketing strategy and energy policy our findings are based on a dataset of 4968 experimental choices made by 414 german residential consumers collected in a stated preference survey

how wrong can you be implications of incorrect utility function specification for welfare measurement in choice experiments despite the vital role of the utility function in welfare measurement the implications of working with incorrect utility specifications have been largely neglected in the choice experiments literature this paper addresses the importance of specification with a special emphasis on the effects of mistaken assumptions about the marginal utility of income monte carlo experiments were conducted using different functional forms of utility to generate simulated choices multi nomial logit and mixed logit models were then estimated on these choices under correct and incorrect assumptions about the true underlying utility function estimated willingness to pay measures from these choice modeling results are then compared with the equivalent measures directly calculated from the true utility specifications results show that for the parameter values and functional forms considered a continuous quadratic or a discrete linear attribute specification is a good option regardless of the true effects the attribute has on utility we also find that mistaken assumptions about preferences over costs magnify attribute mis specification effects

statistical approaches to the fat tail problem for dichotomous choice contingent valuation if a cumulative density function esti mated from dichotomous choice data has an unre alistically fat right hand tail mean willingness to pay wtp will be overestimated truncating the range of integration results in a lower bound esti mate of the true mean wtp a normalization pro cedure proposed by boyle welsh and bishop 1988 unnecessarily depresses the estimate further a new statistical approach is presented that allows a best guess estimate of mean wtp because this estimate involves extrapolation beyond the range of the data it tends to be highly variable jel q21

estimating an hedonic translog cost function for the home health care industry medicare home health care plays an important role in providing cost effective care for the chronically ill and elderly long seen as a cost effective substitute for nursing home care home care has become even more important with expenditures increasing by 31 4 from 1990 to 1996 the purpose of this paper is to provide a short run cost analysis of a sample of home health care providers to gain insight into the efficient provision of home health care services this paper is a significant improvement over previous studies in that it uses a nationwide database to more accurately represent the multiproduct nature of the industry and uses an hedonic translog cost estimation with desirable economic properties

do children matter an examination of gender differences in environmental valuation abstract this paper is concerned with the role played by children in a household on choice behaviour related to willingness to pay wtp for environmental goods improvements data from a contingent valuation cvm survey dealing with three environmental improvements are used to examine three hypotheses the first is that after controlling for income individuals with children have higher wtp than childless individuals the second hypothesis is that women with children are willing to pay more for environmental improvements than men with children particularly in the case where there is concern for environmental health risks the third is that childless men and women exhibit significant differences in wtp that arise from greater time constraints faced by women estimated wtp functions are shown to be statistically different for four groups of individuals women with children men with children women without children and men without children parents of either gender are willing to pay more than their childless counterparts valuations of mothers and fathers are statistically different for only one of the three goods being evaluated interestingly it is the fathers mean valuations that are higher this may arise from the fact that these environmental improvements lead to better recreational opportunities and as indicated earlier men are less time constrained further support for this view comes from results that show that valuations of childless men are significantly greater than those for childless women for two goods the paper concludes with some directions for future research in the area

rural amenity values and length of residency new residents of rural communities are often assumed to have preferences for development and conservation that differ from those of longer term residents however the literature offers little to quantify presumed preference heterogeneity this article assesses whether stated preferences differ according to length of residency results are based on a conjoint choice experiment survey of rhode island rural residents heterogeneity according to length of town residency is modeled using dummy variables multiplicative interactions and lagrangian interpolation polynomials results are compared across the three models and identify a range of attributes for which willingness to pay depends on length of residency