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

Journal of Product Innovation Management, Forthcoming

34 Pages Posted: 20 Mar 2012

See all articles by Reto Hofstetter

Reto Hofstetter

University of Lucerne - Faculty of Economics and Management

Klaus M. Miller

Goethe University Frankfurt

Harley Krohmer

University of Bern

Z. John Zhang

University of Pennsylvania - The Wharton School - Department of Marketing

Date Written: December 5, 2011

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. We show, conceptually and empirically, 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, we also find that 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.

Keywords: customer integration, willingness to pay, hypothetical bias, value-based pricing, new product pricing

Suggested Citation

Hofstetter, Reto and Miller, Klaus and Krohmer, Harley and Zhang, Z. John, How Do Consumer Characteristics Affect the Bias in Measuring Willingness to Pay for Innovative Products? (December 5, 2011). Journal of Product Innovation Management, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2025967

Reto Hofstetter (Contact Author)

University of Lucerne - Faculty of Economics and Management ( email )

Frohburgstrasse 3
Postfach 4466
Luzern, LU 6002
Switzerland
412295880 (Phone)

Klaus Miller

Goethe University Frankfurt ( email )

Frankfurt
Germany
+49(0)69-798-33865 (Phone)
+49(0-69-798-35001 (Fax)

HOME PAGE: http://www.marketing.uni-frankfurt.de/en/professoren/miller/prof-dr-klaus-miller.html

Harley Krohmer

University of Bern ( email )

Gesellschaftsstrasse 49
Bern, BERN 3001
Switzerland

Z. John Zhang

University of Pennsylvania - The Wharton School - Department of Marketing ( email )

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