Reservation Prices for Product Portfolios Under Uncertainty: the ICEPORT Approach

This study rests on three premises. Consumers often make choice decisions considering multiple products from one or more categories. Consumers’ levels of uncertainty with product performance or their own preference are nuanced in such portfolio-level situations. Under such uncertainty, extant approaches for reservation price elicitation do not suffice for product portfolios. Building on these premises, the authors propose ICEPORT, an approach for Incentive Compatible Elicitation of reservation prices for product PORTfolios. ICEPORT is able to capture the range in a consumer’s reservation prices for each individual product and combinations of products on offer. An empirical application in the context of root beer and cheese puffs, and a replication involving MLB merchandise, demonstrate the superior predictive performance of ICEPORT over several alternatives. The authors note, among managerial implications of ICEPORT, its potential for improving pricing decisions. Limitations of this study and future research directions are discussed.