Economic Valuation of Product Features

Authors

Greg M. Allenby, Ohio State University
Jeff Brazell
John R. Howell, Brigham Young University - ProvoFollow
Peter E. Rossi, University of California, Los Angeles

Keywords

market-based valuation, feature enhancement, conjoint analysis

Abstract

We develop a market-based paradigm to value the enhancement or addition of features to a product. We define the market value of a product or feature enhancement as the change in the equilibrium profits that would prevail with and without the enhancement. Conjoint data can be use to construct the demand system necessary to compute equilibrium prices but assumptions about competitive offerings and cost are required as well. We contrast our approach to the frequent practice of computing what we call pseudo-WTP (willingness to pay) and show that pseudo-WTP may greatly over-estimate the value of a feature. We illustrate our methods using a survey of digital camera owners.

Original Publication Citation

Allenby, Greg M., Jeff Brazell, John R. Howell, and Peter E. Rossi. "Economic Valuation of Product Features", Quantitative Marketing and Economics, 2014.

BYU ScholarsArchive Citation

Allenby, Greg M.; Brazell, Jeff; Howell, John R.; and Rossi, Peter E., "Economic Valuation of Product Features" (2014). Faculty Publications. 8542.
https://scholarsarchive.byu.edu/facpub/8542

Document Type

Peer-Reviewed Article

Publication Date

2014

Publisher

Quantitative Marketing and Economics

Language

English

College

Marriott School of Business

Department

Marketing

University Standing at Time of Publication

Assistant Professor

Copyright Use Information

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