Faculty of Economics and Business Administration Publications Database

Two New Features in Discrete Choice Experiments to Improve Willingness to Pay Estimation that Result in New Methods: Separated (Adaptive) Dual Response

Schlereth, Christian
Volume: 63
Number: 3
Pages: 829 - 842
Month: March
ISSN-Print: 0025-1909
Link External Source: Online Version
Year: 2017
Keywords: Willingness to pay; Discrete choice experiments; Choice-based conjoint; Pricing; No-purchase option
Abstract: 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.