Price vector issue in a choice experiment: A methodological proposal

This paper investigates the effects of the choice of price vector on the estimates of parameters and the willingness to pay (WTP) in choice experiments, and proposes an operative solution to deal with the selection of this attribute for products sold at a wide range of market prices. With this in mind, we have conducted a choice experiment on 0.75 litre bottles of red wine for everyday use in Italy. Each respondent was attributed the price vector most coherent with his purchasing habits selected between the two vectors identified as representative of the Italian wine market. The results of applying a Random Parameter Logit Model point out the presence of significantly different WTPs between the two sub-samples, thereby showing the importance of breaking down the price range. The paper sheds new light on the role of the price vector in choice experiments on wine and on products with similar characteristics, such as extra-virgin olive oil, beer, and alcoholic beverages in general, which prices have a wide range and are strongly related to the product’s expected quality.