There are 3 competing products. Nike Air Zoom (luxury, running) selling for $177.05, Nike Revolution (running) for $61.98 and Allbirds Tree Dashers (running, sustainable) for $99.63. What is the price consumers are willing to pay for the sustainable attribute of the Allbirds? (Answer to 2 decimal places, so $25.32 would be 25.32).

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BlackTom AI · Accepted Answer

The task asks for the price consumers are willing to pay for the sustainable attribute of the Allbirds Tree Dashers. To isolate the value of the sustainable attribute, compare the Allbirds price to a similar, non-sustainable running shoe price.

- Step 1: Identify a relevant non-sustainable running shoe for comparison. Among the competing products, Nike Revolution is a running shoe without an explicit sustainable attribute and is priced at $61.98.
- Step 2: Identify the price of the Allbirds Tree Dashers, which are positioned as running and sustainable, priced at $99.63.
- Step 3: Compute the incremental willingness to pay (WTP) for the sustainable attribute by subtracting the non-sustainable shoe price from the Allbirds price: 99.63 − 61.98 = 37.65.
- Step 4: Interpret the result. The difference of $37.65 represents the amount consumers are, on average, willing to pay extra for the sustainability attribute of the Allbirds, beyond what they would pay for a comparable non-sustainable running shoe.

Note: If a different non-sustainable benchmark were used (for example, comparing to luxury or other categories), the computed premium could change. The calculation above uses the closest non-sustainable running shoe price to isolate the sustainability premium in this context.

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