Comparing hypothetical versus non-hypothetical methods for measuring willingness to pay in a food context

Abstract

Choosing a valid procedure to measure willingness to pay (WTP) is crucial for designating optimum price policies or for evaluating the demand for new products. This study compares two methods for obtaining WTP in a food context: a random nth price auction and an open-ended contingent valuation (CV) question. Participants were regular salad tomato buyers of Alicante and they were randomly assigned to one of the two treatments. The products about which they would show their WTP were traditional tomato varieties. Both treatments were divided into three stages: in the first stage the only available information was a reference price for the tomatoes. In stages 2 and 3 we revealed the local origin and the organic grown of the tomatoes respectively. Our results show that in the auction the percentage of participants willing to pay the same or more than the reference price was between 20 and 30%. In the CV method this percentage was between 40 and 65%. The mean WTP in the auction, considering the whole of the individuals, was situated between 1.90 and 2.13 €/kg. These same results obtained through the CV were situated between 2.54 and 3.21 €/kg. The results confirmed the findings of previous papers in which the hypothetical bias of CV was clarified because it yields higher values for WTP than the auction, especially when referring to the number of individuals willing to pay more. Additionally, hedonic price models were estimated for the prices obtained by both methods with the result that in all the models, WTP was directly related to the price paid for the latest purchase of tomatoes.

Keywords

• experimental auction
• contingent valuation
• traditional varieties
• hedonic prices
• consumer preferences
• fresh tomatoes