Willingness to Pay-inference in the absence of rejected propositions. (November 2017)

• Record Type: Journal Article
• Authors: van Cranenburgh, Sander; Chorus, Caspar G.
• Is Part Of: Journal of retailing and consumer services. Volume 39(2018)
• Page Start: 35
• Page End: 42
• Publication Date: 2017-11
• Subjects: Willingness to Pay -- Discrete choice -- Shopping location; Retail trade -- Periodicals; Service industries -- Periodicals; Customer services -- Periodicals; Commerce de détail -- Périodiques; Service à la clientèle -- Périodiques; Customer services; Retail trade; Periodicals; 658.87
• DOI: 10.1016/j.jretconser.2017.07.001
• Languages: English
• ISSNs: 0969-6989

Abstract

Abstract: This paper presents a method to infer a Willingness to Pay (WtP) distribution based on a sample of observations of individuals who pay a particular price for a particular quality increase. Crucially, no observations are available of individuals who reject a higher price/higher quality proposition, and choose a lower price/lower quality alternative instead. While at first sight it may seem impossible to infer a WtP distribution in the absence of such rejected propositions, we show that this is possible under the assumption that there is a certain degree of alignment of supply (of propositions) and demand (WtP) in the market. The method is Maximum Likelihood-based, and easy to implement. The method is shown to have a promising empirical performance on a synthetic dataset and a dataset of revealed shopping destination choices.