Discrete choice experiments with multiple price vectors for products sold in a wide price range

Abstract

The discrete choice experiment is a widely used methodology in consumer studies. However, applying this method to investigate the market of products sold in a wide price range could present issues as to the quality of the estimate of preferences. In fact, for this type of product, frequently consumers may have different behaviours when faced with different price levels. For example, some market segments may refrain from purchasing products below certain price thresholds, considering them of an unacceptable quality, while others choose only below certain prices. To work around this problem area, we propose a methodology in which each respondent declares his own price interval of reference and consequently participates in a choice experiment with a price vector coherent with his habits. In this manner, we are able to grasp and include in the estimations the heterogeneity of consumers with respect to price and thus obtain more accurate willingness to pay estimates. • The method describes a procedure to bypass issues related to identifying the price vector in discrete choice experiments that involve products sold in a wide price range. • We propose a discrete choice experiment with different price vectors for consumer segments with different price preferences. Method name: Discrete choice experiments with multiple price vectors, Keywords: Price preference heterogeneity, Wine, Experimental design, Willingness to pay, Quality cue