An Empirical Comparison of Methods to Measure Willingness to pay by Examining the Hypothetical Bias

Klaus Backhaus and Robert Wilken
University of Muenster

Markus Voeth and Christina Sichtmann
University of Hohenheim

INTRODUCTION

Knowledge of the exact willingness to pay (or reservation price) is essential for a company's profit: errors in predicting willingness to pay may lead to the selection of an inferior price and, therefore, induce the loss of potential profit or market share. Empirical studies show that even small price variations can have a sustainable impact on profit (Garda & Marn 1993; Marn et al. 2004). Consequently, as price is one of the main drivers of profit, the determination of the profit-maximising price constitutes a vital topic in marketing practice.