An experimental approach to valuing new differentiated products
An experimental store was created to evaluate initial demand for locally-produced and guaranteed tender steak products as a more realistic alternative to contingent valuation (CV) and dichotomous-choice experimental methods. Strengths of the approach are incentive compatibility, a realistic consumption set, and a familiar choice environment. Consumers selected among USDA Choice, premium quality, lean, guaranteed tender, and locally-produced strip steaks. A double-hurdle count data model indicated initial willingness-to-pay for locally-produced steak comparable to prior CV results, but demand was highly elastic. Demand for premium quality steak crowded out demand for the guaranteed tender product, contrasting with prior dichotomous-choice experimental results.
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