Estimate the Reference Level in Choice Simulator (WTP)

Question

Hey everyone,

(to catch up: https://legacy.sawtoothsoftware.com/forum/31980/simulation-sawtooth-choice-simulator-requires-arguments)

Im sorry but I have to add one more question:

I was able to calculate the Willingness-To-Pay but how can I find the values of the Reference Level? Or is it set to zero?

Answer 1

The Choice Simulator uses an algorithm to figure out which level is the least preferred on average, and uses that as the reference level.

You can specify a custom value by visiting the WTP settings window. On the scenario settings ribbon there is the Range Behavior setting (which should be 'Willingness to Pay'). Next to that is the settings button.

Comments

Thanks for the quick reply!
I found it but still dont really get the logic behind it. What is the value of the  specific reference levels? F. E. if an attribute is valued with 2$ do I just add these 2$ to a "real" market price?

If I would zero the reference level the price in the end would be zero. So taking a "real" market price would avoid that?
Hope it is understandable.

Regards,
Timo

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I'm not sure I understand what you are asking. When thinking about WTP, it is the amount people are willing to pay for level Y over level X. Level X would be the reference level. So there isn't a value associated with the levels, but there are values associated with the relationship of each (other) level with respect to the reference level.

By default, we choose the lease preferred level so that the WTP amounts should come out as positive numbers.

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So as an example, if I were calculating WTP on an attribute 'Hard Drive Size' with levels '256', '512', '1024', and '2048', we would use 256 as the reference level since it would be the least preferred (all else equal).

I can compute the WTPs of 512, 1024 and 2048 over 256, but there is no value associated with 256 itself.

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Got it - thank you!