Journal of Economic Behavior & Organization, 46(4), 409–421. 2005). Statistics in Medicine, 21(4), 589–624. A higher WTP indicates a worse quality of life and thus, as with utilities, WTP is a measure of the quality of life disease burden. Journal of the Academy of Marketing Science Our results are more general across a wide range of product categories and experimental designs. 2006; Leigh et al. Breidert, C., Hahsler, M., & Reutterer, T. (2006). 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. Anderson, J. C., Jain, D. C., & Chintagunta, P. K. (1992). (2011) and Jedidi and Zhang (2002), we define \( {u}_i^{\ast } \) as the utility of the “no choice” option. Different adaptions of these Vickrey auctions are available, such as the random nth price auction (Shogren et al. The last category only contains control variables. In addition to the type of measurement, value of the product, product type, and type of subject design have a significant influence on the hypothetical bias. Management Science, 48(10), 1350–1368. © 2020 Springer Nature Switzerland AG. Babić Rosario, A., Sotgiu, F., de Valck, K., & Bijmolt, T. H. A. Hampshire, United Kingdom: Cengage Learning EMEA. Our findings are relevant for academic researchers and managers. Journal of Consumer Research, 37(3), 409–425. Including unpublished studies can address this concern; in our sample, 22 of 117 ESs come from unpublished studies, for an unpublished work proportion of 19%, which favorably compares with other meta-analyses pertaining to pricing, such as 10% in Tully and Winer (2014), 9% in Bijmolt et al. Similarly, consumers’ uncertainty might be reduced in a WTP experiment by giving them an opportunity to inspect and test the product before bidding. L. (2016). What experimental protocol influence disparities between actual and hypothetical stated values? 2005). Minimum willingness to pay will denote the least price on the price tag when the consumer finds on the product and then feel doubt regarding the quality of the product. Dimoka, A., Hong, Y., & Pavlou, P. A. However, this point should not be taken to mean that the difference of the hypothetical bias between two conditions of a moderator is Exp(β) − 1 percentage points, because that value depends on the values of other moderators. The experiments in our meta-analysis span different countries and years, so we converted all values into U.S. dollars using the corresponding exchange rates. Ariely, D., Ockenfels, A., & Roth, A. E. (2005). ), Handbook of experimental economics results (Vol. International Journal of Game Theory, 27(3), 427–441. Indirect methods for measuring HWTP also have some drawbacks that might influence the hypothetical bias. For example, a possible explanation for the limited accuracy of indirect measures could reflect coherent arbitrariness (Ariely et al. We hypothesize: Giving participants the opportunity to test a product before bidding reduces the hypothetical bias. Which response format reveals the truth about donations to a public good? Third, we included only studies that reported the mean and standard deviation (or values that allow us to compute it) of HWTP and RWTP or for which the authors provided these values at our request. Yet this finding still seems surprising to some extent. Ariely, D., Loewenstein, G., & Prelec, D. (2006). An extensive comparison of those adaptions, in terms of their effects on the hypothetical bias, would provide researchers and managers more comprehensive insights for choosing the right method when measuring WTP. Mark Houston and John Hulland served as Special Issue Editors for this article. 1: Market data analysis. The first model, including only the intercept, results in an estimate (β) of 0.1889 with a standard error (SE) of 0.0183 and a p value < .0001. Therefore, practitioners regularly turn to HWTP during the product development process, before the final product actually exists. https://doi.org/10.1007/s11747-019-00666-6, DOI: https://doi.org/10.1007/s11747-019-00666-6, Over 10 million scientific documents at your fingertips, Not logged in Kohli, R., & Mahajan, V. (1991). The descriptive statistics cannot confirm H6 though, because giving participants an opportunity to test a product before stating their WTP increases the ES (0.2525) relatively to no such opportunity (0.1626). 2012; Vega et al. Next, we estimated two models with all ESs, including the two outliers, but varied varied the number of included moderators (Models 2 and 3 in Table WA2). All of these models are available in Web Appendix F. Though three meta-analyses discussing the hypothetical bias exist (Carson et al. We in turn propose several potential mechanisms that could produce this surprising finding. This makes sense and tells us that we should consider the product category when deciding which willingness to pay measurement approach we should use. The Willingness To Pay method (WTP) is a contingent evaluation requiring respondents to imagine a market for a program or health benefit and to reveal the maximum that they would be willing to pay for that program or benefit. We present the results and affirm their robustness with multiple methods. 2010). 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%. 2003). “Coherent arbitrariness”: Stable demand curves without stable preferences. In addition to these theoretical insights on WTP measures, we contribute to marketing literature by showing how to model stochastically dependent ESs explicitly when the covariances and variances of the observed ESs are known or can be computed. The application of Willingness To Pay (WTP) measurement with Contingent Valuation Method (CVM) to medical services is gradually increasing. Marketing Letters, 27(1), 195–210. 1999). between-subject designs), thus a stronger downward adjustment of HWTP values is necessary to reflect consumers’ RWTP. In contrast with conventional wisdom, indirect methods actually overestimate RWTP significantly stronger than direct methods. In addition, instead of the multivariate mixed linear model, we used a random-effects, three-level model, such that the ES measures nested within studies with a V-known model at the lowest level (Bijmolt and Pieters 2001; van den Noortgate et al. Measuring Customer Preferences As you learned in Week 1, understanding customer willingness to pay (WTP) is critical for effective pricing. (2004). On the meta-analysis of response ratios for studies with correlated and multi-group designs. Kimenju et al. 2004) and have been used in prior empirical studies to measure RWTP. Article  Customer Needs and Solutions, 5(3–4), 146–161. In accordance with Miller et al. In turn, they form the basis for modeling the dependent ESs appropriately. These results could be cross-validated in future experimental studies. In our context, for example, a study might measure HWTP with different methods and compare the results to the same RWTP, leading to multiple ESs that correlate because they share the same RWTP. European Journal of Operational Research, 219(2), 368–378. Model-free evidence gathered from the moderators that reflect the research design also supports H5, in that the mean for between-subject designs is lower (0.1800) than that for within-subject designs (0.2798). Each product features several product attributes, and each attribute offers various levels. First, we consider the concept of coherent arbitrariness, as first introduced by Ariely et al. The meta-regression shows that, compared with direct measurement methods, the hypothetical bias is considerably higher in indirect measures, by 10 percentage points in a full model. Experimental methods: Between-subject and within subject designs. Third, the hypothetical bias depends on a variety of factors, including individual-level considerations (Hofstetter et al. (2011). Burnham, K. P., & Anderson, D. R. (2004). 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. Accordingly, it applies to studies that measure the same outcome on different scales (Borenstein et al. Factors influencing the ranging behavior of chacma baboons (papio hamadryas ursinus) living in a human-modified habitat. (2005) propose to randomly choose one of the selected alternatives and make that choice binding. Information impact and allocation rules in auctions with affiliated private values: A laboratory study. These recently developed methods have not been tested by empirical comparison studies, so we could not include them in our meta-analysis. (2010) show that participants state a higher RWTP when real products, rather than images, have been displayed. Yet we do not find any difference between shopping and convenience goods, prompting us to posit that the hypothetical bias might not be affected by moderate search effort; rather, only products demanding strong search effort increase the hypothetical bias. Relation of consumers’ buying habits to marketing methods. Please refer to Web Appendix A for a more detailed discussion of the existing meta-analyses. 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. Consequently, we define ES as: Most meta-analyses assume the statistical independence of observed ESs, but this assumption only applies to limited cases; often, ESs are stochastically dependent. Understanding influence of marketing thought on practice: An analysis of business journals using textual and latent Dirichlet allocation (LDA) analysis. 1, pp. The second category of moderators, dealing with the research stimulus, includes value, or the mean RWTP for the corresponding product. Hedges, L. V., Gurevitch, J., & Curtis, P. S. (1999). The results in Table 4 reconfirm the support for H1b, because the type of measurement HWTP has a positive, significant effect (β = 0.0905, Exp(β) = 1.0947, SE = 0.0382, p = 0.0177), resulting in a multiplication factor of 1.0947. We estimated the two main models and the three robustness check models with this random-effects three-level model (Models 4–8 in Table WA2). Attributes, and within-subject designs ( cf this additional budget to profit each participant DeGroot, H.! Not impose any financial consequences for participants ’ uncertainty and heterogeneity when evaluating a increases! 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