Multiple Price List Systematically Lowers Valuation

68 Pages Posted: 23 Jun 2023 Last revised: 21 Mar 2024

See all articles by Randy Yang Gao

Randy Yang Gao

New York University (NYU) - New York University (NYU), Leonard N. Stern School of Business, Department of Marketing, Students

Simon Huang

University of California, Berkeley

Minah Jung

New York University (NYU) - Department of Marketing

Date Written: January 5, 2024

Abstract

Accurately measuring consumer valuation of products and services is crucial for marketers and consumer researchers. However, commonly used value elicitation methods do not produce the same estimate of consumer valuation (willingness-to-pay). Across ten preregistered, incentivecompatible studies (total N = 6,829), we document a robust difference between two commonly used incentive-compatible value elicitation methods that are theoretically equivalent: the Multiple Price List method (MPL) and the Becker–DeGroot–Marschak method (BDM). WTP elicited under the MPL method is substantially lower than WTP elicited under the BDM method. This difference is robust to several design features of the MPL method, different product categories and price ranges, as well as participant populations. This difference appears to be explained in part by the increased salience of product-money tradeoff and consideration of opportunity cost under the MPL method. Because the MPL method significantly lowers people’s WTP for products, using this method to assess consumer valuation can severely underestimate market demand. The use of the MPL method can also lower valuation to such an extent as to obscure real effects on consumer valuation, increasing the risk of false negatives for consumer researchers.

Keywords: Consumer Valuation, Value Elicitation, Willingness to Pay, Multiple Price List, Pricing, Becker–DeGroot–Marschak Method

Suggested Citation

Gao, Randy and Huang, Simon and Jung, Minah, Multiple Price List Systematically Lowers Valuation (January 5, 2024). Available at SSRN: https://ssrn.com/abstract=4484841 or http://dx.doi.org/10.2139/ssrn.4484841

Randy Gao (Contact Author)

New York University (NYU) - New York University (NYU), Leonard N. Stern School of Business, Department of Marketing, Students ( email )

Henry Kaufman Ctr
44 W 4 St.
New York, NY
United States

Simon Huang

University of California, Berkeley

Minah Jung

New York University (NYU) - Department of Marketing ( email )

Henry Kaufman Ctr
44 W 4 St.
New York, NY
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
262
Abstract Views
1,146
Rank
221,329
PlumX Metrics