Have an idea?

Visit Sawtooth Software Feedback to share your ideas on how we can improve our products.

Calculate WTP with the help of linear interpolation

Dear forum members,

does anyone have experience with calculating WTP by using linear interpolation between the price levels? I followed the approach of a paper using this approach.

I am calculating the utility of the product with the attribute levels of my choice by summing up the part-worth utilities (without price) and subtract it from the utility of the non-choice option. Then I take this value as y-value and search for the related x-value of my function (consisting of 5 price levels as x-values und the 5 part-worth utilities of the price levels as y-values) with linear interpolation (on a respondent level).

For many respondents I get reasonable results. But for some respondents the y-value, I search for (the utility of a certain price), is not among the given utility values of the 5 price levels. Hence, I cannot interpolate. Does that mean, that the WTP is zero? Or simply not determinable?

Thank you in advance for your help.

asked Aug 19, 2019 by Mary (340 points)

1 Answer

0 votes

I'm a little confused by your description of your method.  This paper describes both a standard algebraic calculation of WTP as well as what we believe is a better simulation-based measure:  https://sawtoothsoftware.com/support/technical-papers/general-conjoint-analysis/assessing-the-monetary-value-of-attribute-levels-with-conjoint-analysis-warnings-and-suggestions-2001
answered Aug 21, 2019 by Keith Chrzan Platinum Sawtooth Software, Inc. (93,025 points)