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

Author

Listed:
  • 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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    Cited by:

    1. 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.
    2. Wei, Xiaohan & Chen, Xuqi & Gao, Zhifeng & Jensen, Kimberly L. & Yu, Tun-Hsiang & DeLong, Karen L., 2020. "The Reference Price Effect on Willingness-to-Pay Estimates: Evidence from Eco-labeled Food Products," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304573, Agricultural and Applied Economics Association.
    3. Lijia Shi & Jing Xie & Zhifeng Gao, 2018. "The impact of deal†proneness on WTP estimates in incentive†aligned value elicitation methods," Agricultural Economics, International Association of Agricultural Economists, vol. 49(3), pages 353-362, May.
    4. Francisco Rosas & Santiago Acerenza & Peter F. Orazem, 2020. "Optimal pricing strategies for a cluster of goods: own- and cross-price effects with correlated tastes," Applied Economics, Taylor & Francis Journals, vol. 52(7), pages 742-755, February.
    5. 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.
    6. 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.
    7. Ebad Allah Jahanabadi & Seyed Nematolla Mousavi & Mohammad Hashem Moosavihaghighi & Mohammad Reza Eslami, 2024. "Consumers’ willingness to pay for antibiotic-free chicken meat: application of contingent valuation method," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(10), pages 25151-25172, October.
    8. repec:ags:cfcp15:344264 is not listed on IDEAS
    9. Lehberger, Mira & Grüner, Sven, 2021. "Consumers’ willingness to pay for plants protected by beneficial insects – Evidence from two stated-choice experiments with different subject pools," Food Policy, Elsevier, vol. 102(C).
    10. 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.
    11. Drichoutis, Andreas C. & Lusk, Jayson L. & Pappa, Valentina, 2016. "Elicitation formats and the WTA/WTP gap: A study of climate neutral foods," Food Policy, Elsevier, vol. 61(C), pages 141-155.
    12. Mangole, Cool Dady & Mulungu, Kelvin & Kaghoma, Christian Kamala & Tschopp, Maurice & Kassie, Menale, 2024. "Smallholder farmers’ willingness to pay for digital agricultural extension services: Evidence from Tanzania and Burkina Faso," IAAE 2024 Conference, August 2-7, 2024, New Delhi, India 344264, International Association of Agricultural Economists (IAAE).
    13. 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.
    14. 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.
    15. Wang, Erpeng & Gao, Zhifeng & Heng, Yan & Shi, Lijia, 2019. "Chinese consumers’ preferences for food quality test/measurement indicators and cues of milk powder: A case of Zhengzhou, China," Food Policy, Elsevier, vol. 89(C).

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