How Do Consumer Characteristics Affect the Bias in Measuring Willingness to Pay for Innovative Products?

Getting the price right is essential for successful new product introductions. An accurate estimate of consumers' willingness to pay is a crucial part of this task. Measurement of willingness to pay for innovations, however, often yields biased results. In this paper, we investigate consumer-related characteristics and motives that might underlie this bias. We show, conceptually and empirically, that the validity of willingness to pay statements is higher among consumers who show a high ability to assess the new product's utility and who are truly interested in purchasing the new product. Counter to intuition, we also find that willingness to pay statements from innovators, consumers with good product category knowledge, or consumers who perceive the new product to be highly innovative, are relatively more biased and should be interpreted with caution