Estimation of Willingness-to-Pay: Theory, Measurement, by Christoph Breidert

By Christoph Breidert

To figure out the willingness-to-pay (WTP) for items and/or providers from a purchaser point of view is important for contemporary techniques to pricing. With the fee Estimation ( PE scene) Christoph Breidert introduces a brand new solution to estimate WTP. it really works as an aditional interview scene appended to conjoint research and gives the respondents a dynamically generated series of product offerings with assigned costs.

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Extra resources for Estimation of Willingness-to-Pay: Theory, Measurement, Application

Example text

As shown in the empirical investigation for bundling in the Nokia online shop, these two are the main criteria to select a bundling strategy. Building upon the model of Adams and Yellen (1976) other researchers have generalized the findings by assuming populations of consumers with different distributions of wilhngness-to-pay. Schmalensee (1984) extended the model for the two product case from individually known WTPs to a distribution of WTPs and analyzes the bundling strategies more formally. He aimed at drawing general findings about the relationship between the WTPs for the bundled products and the variable cost structure.

With these findings Schmalensee provided conditions under which the use of the different strategies yields the highest profits. Note that other authors, such as Fiirderer (1999) and Olderog and Skiera (2000), also assumed that WTPs for product bundles are normally distributed. In the empirical investigation in this thesis this assumption will be challenged. Similar results as found by Schmalensee (1984) were derived from a simulation performed by Olderog and Skiera (2000). Their main findings were that the relationship between the variable costs and the WTPs is more important than the correlation between the WTPs.

A: B: Customers buying bundle B Customers buying nothing wtpx: Wilhngness-to-pay for product X wtpy-. Willingness-to-pay for product Y Pb'. 3: Customer segments under pure-bundhng. tPy Pb ^\ A Py « ; X A: B: C: D: a, c, d: B c . c D /h Pb ^tpy wtpx. wtpy'. Px'. Py\ pb'. 4: Customer segments under mixed-bundling. 18 2. Pricing in the Marketing Mix Wtpy a • Sx Pb ,a. 5: Comparison of surplus derived from purchase of bundle and of product Y. 4 shows the customer segments under mixed-bundhng. The prices for the two products are the same as under pure-unbundhng, and the bundle price is the same as under pure-bundling.

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