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The Cross-Price Effect on Willingness-to-pay Estimates in Open-ended Contingent Valuation

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  • Shi, Lijia
  • Chen, Xuqi
  • Gao, Zhifeng

Abstract

Pricing decisions for new product are always challenging due to limited information such as market needs and competition. Contingent valuation is a widely used technique to elicit value for new products or non-market goods. Previous literature has shown that potential buyers use a reference product to form their opinion about the value of a new product (Monroe and Della Bitta, 1978). Therefore, pricing decision is an interactive process. Based on the extensive marketing literature about cross-price effect, we investigate the impact of reference price on consumer willingness-to-pay (WTP) for multiple similar products in an open-ended contingent valuation context. Two generalizations of the cross-price effect: the neighborhood price effect and the asymmetric price effect are examined. Our results show that the cross-price effect on WTP is prominent and the neighborhood price effect also holds in contingent valuation. However, we don’t reach any conclusion about the asymmetric price effect based on our limited information.

Suggested Citation

  • Shi, Lijia & Chen, Xuqi & Gao, Zhifeng, 2013. "The Cross-Price Effect on Willingness-to-pay Estimates in Open-ended Contingent Valuation," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150774, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaea13:150774
    DOI: 10.22004/ag.econ.150774
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    5. Cokou Patrice Kpadé & Edouard Roméo Mensah & Michel Fok & Jupiter Ndjeunga, 2017. "Cotton farmers’ willingness to pay for pest management services in northern Benin," Agricultural Economics, International Association of Agricultural Economists, vol. 48(1), pages 105-114, January.
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    7. Jaqueline Garcia-Yi, 2014. "Identification of Dried Native Chili Markets in the International Tourism Sector in Peru: An Open-Ended Contingent Valuation Study," Sustainability, MDPI, vol. 6(2), pages 1-14, February.
    8. Erpeng Wang & Zhifeng Gao, 2017. "Chinese Consumer Quality Perception and Preference of Traditional Sustainable Rice Produced by the Integrated Rice–Fish System," Sustainability, MDPI, vol. 9(12), pages 1-13, December.
    9. Xuqi Chen & Zhifeng Gao & Lisa House & Jiaoju Ge & Chengfeng Zong & Fred Gmitter, 2016. "Opportunities for Western Food Products in China: The Case of Orange Juice Demand," Agribusiness, John Wiley & Sons, Ltd., vol. 32(3), pages 343-362, July.
    10. Li, Xiaogu & Jensen, Kimberly L. & Clark, Christopher D. & Lambert, Dayton M., 2016. "Consumer willingness to pay for beef grown using climate friendly production practices," Food Policy, Elsevier, vol. 64(C), pages 93-106.
    11. Chen, Xuqi & Gao, Zhifeng & Swisher, Marilyn & House, Lisa & Zhao, Xin, 2018. "Eco-labeling in the Fresh Produce Market: Not All Environmentally Friendly Labels Are Equally Valued," Ecological Economics, Elsevier, vol. 154(C), pages 201-210.
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