By: Gary Taylor
April 11, 2011
The article I chose to review was “How Should Consumers Willingness to Pay Be Measured? An Empirical Comparison of State-of-the-Art Approaches” which is a business marketing data research study. Business marketing research provides data concerning a vast amount of profit and trend related questions. Its purpose is to provide organizations with statistical or subject relevant solutions and answers to the efficiency and practicality of marketing resources. In my chosen article the question of whether the four commonly used approaches of measuring a consumers’ willingness to pay (WTP) are tested and studied to see preliminary results regarding the relative performance of each.
The four approaches researched in this article come from two main categories with hypothetical and actual results. The first discussed is the hypothetical direct situation represented by the open-ended (OE) question format, which directly asks the consumer their WTP for products and services. The second approach concerns the hypothetical indirect situation represented by choice-based conjoint (CBC) analysis, which indirectly asks consumers’ of their WTO by providing several alternate products to choose from including a “none” category. Actual-direct measuring of a consumers’ WTP, the third approach, is done so by using the BDM mechanism, named after its proprietors, which obligates its participants to purchase products that have lottery drawn prices that are less or equal to the amount the participant stated as their WTP. The actual-indirect approach is registered by the incentive-aligned choice-based (ICB) conjoint analysis. This fourth approach also obligates participants to purchase products based on the participants’ WTP that has been inferred by their preferences using the BDM mechanism. These four approaches are measured against the REAL to see whether they accurately... [continues]
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