Faculty of Economics and Business Administration Publications Database

How Do Consumer Characteristics Affect the Bias in Measuring Willingness to Pay for Innovative Products

Authors:
Hofstetter, Reto
Krohmer, Harley
Zhang, John Zhong
Source:
Volume: 30
Number: 5
Pages: 1042 - 1053
Month: September
ISSN-Print: 0737-6782
Link External Source: Online Version
Year: 2013
Abstract:

Getting the price right is essential for successful new product introductions. An accurate estimate of consumers' willingness to pay is a crucial part of this task. Measurement of willingness to pay for innovations, however, often yields biased results. In this paper, we investigate consumer-related characteristics and motives that might underlie this bias. Drawing on the elaboration likelihood model, we develop a conceptual model to identify consumer characteristics relevant for preference measurement for innovative products. In doing so, two main factors that potentially influence hypothetical bias are distinguished: ability and motivation. Our conceptual discussion and empirical results demonstrate that the validity of willingness to pay statements is higher among consumers who show a high ability to assess the new product's utility and who are truly interested in purchasing the new product. Counter to intuition, willingness to pay statements from innovators, consumers with good product category knowledge, or consumers who perceive the new product to be highly innovative are relatively more biased and should be interpreted with caution.

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