Willingness to pay
To calculate willingness to pay, firstly a demand model was
estimated. In this consumption of the product (y) was the
dependent variable; product price (P), consumer income (I) and a
dummy (D) variable, which measures whether or not the product
was frozen, were the independent variables (Equation 1). In the
equation, indicates parameter estimates and e indicates error
term.
The dummy variable (D) for non-frozen products is assigned a
value of zero and, in this case, the demand equation is written as
follows: