Abstract
AbstractThis article is the first to investigate respondents' ease of understanding and answering valuation questions related to the Becker–DeGroot–Marschak (BDM) and multiple price list mechanisms. Using a between‐subjects design, we elicit willingness to pay (WTP) for healthy snack bars using two mechanisms, ask questions about ease of understanding and answering the valuation questions, and record the response times to the valuation questions. We do not find significant differences in estimated WTP and response times between the two methods. However, the respondents in the multiple price list (MPL) sessions found it easier to understand this mechanism and decide on a response than those in the BDM sessions. As a result of our findings, we recommend that MPL is adopted over BDM when there is limited opportunity to explain or learn the method before the valuation or when one is concerned that a complicated design can affect the willingness to participate and thereby create selection bias. Both concerns will often apply when small and medium size agribusinesses conduct market testing of their products in stores or field markets. [EconLit Citations: C18, C19, D44, Q13].
Highlights
In food marketing research, it is sometimes useful to collect realistic consumer willingness to pay (WTP) data for new food products (Lusk & Shogren, 2007)
We investigated five different types of products: the first four (P1–P4) were new experimental healthy snack bars containing different ingredients (i.e., P1 is “Oat and tomato,” P2 is “Legumes and zucchini,” P3 is “Almond and buckwheat,” and P4 is “Legumes and chia seeds”) not available on the food market and were supplied by the Italian company Macè srl,2 while the fifth sample (i.e., P5 is “Almond and cranberry”) was a conventional healthy snack bar consumed widely on the Norwegian food market and purchased from a local store
The results show that equality of means across BDM and multiple price list (MPL) is rejected at the 5% significance level, indicating that the respondents found MPL easier to understand than BDM
Summary
It is sometimes useful to collect realistic consumer willingness to pay (WTP) data for new food products (Lusk & Shogren, 2007). We focus on the BDM and MPL mechanisms These two experimental valuation mechanisms have several things in common: the price is a result of a randomization mechanism; sales depend only on the drawn price and the choice of an individual respondent; a single participant can complete the valuation alone or many can complete it simultaneously; implementation is quick and easy both in laboratory and field settings; and the widespread adoption of the methods in consumer food studies. The researcher randomly selects one price, and the respondents' choice for that price is implemented (Andersen et al, 2006; Kahneman, Knetsch, & Thaler, 1990) As it is in a respondent's best interest to say “yes” if and only if the price is lower than his WTP for the product, the MPL method is incentive compatible (Alfnes & Rickertsen, 2010). MPL is used to elicit risk preferences (Drichoutis & Lusk, 2016)
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