In behavioral economics, willingness to pay (WTP) is the maximum price at or below which a consumer will definitely buy one unit of a product. This corresponds to the standard economic view of a consumer reservation price. Some researchers, however, conceptualize WTP as a range.
According to the constructed preference view, consumer willingness to pay is a context-sensitive construct; that is, a consumer's WTP for a product depends on the concrete decision context. For example, consumers tend to be willing to pay more for a soft drink in a luxury hotel resort in comparison to a beach bar or a local retail store.
Experimental context
In laboratory experiments auctions are conducted, a premise of the experiment is often that "bid = WTP".
See also
- Cost-benefit analysis
- Welfare economics
References
- Varian, Hal R. (1992), Microeconomic Analysis, Vol. 3. New York: W. W. Norton.
- Bernard Ruffieux; Laurent Muller (May 2011). "Do price-tags influence consumers' willingness to pay? On the external validity of using auctions for measuring value Article". Experimental Economics. doi:10.1007/s10683-010-9262-4.
Further reading
- Anderson, James C., Dipak Jain, and Pradeep K. Chintagunta (1993), "Understanding Customer Value in Business Markets: Methods of Customer Value Assessment," Journal of Business-to-Business Marketing, 1 (1), 3–30.
- Breidert Christoph, Hahsler, Michael, and Reutterer (2006), "A Review of Methods for Measuring Willingness-to-Pay", Innovative Marketing, 2(4), 8–32.
- Miller, Klaus M., Hofstetter, Reto, Krohmer, Harley, Zhang, John Z. (2011), "How Should Consumers' Willingness to Pay be Measured? An Empirical Comparison of State-of-the-Art Approaches", Journal of Marketing Research.
- Wertenbroch, Klaus and Bernd Skiera (2002), "Measuring Consumers' Willingness to Pay at the Point of Purchase," Journal of Marketing Research, 39 (May), 228–41.
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In behavioral economics willingness to pay WTP is the maximum price at or below which a consumer will definitely buy one unit of a product This corresponds to the standard economic view of a consumer reservation price Some researchers however conceptualize WTP as a range According to the constructed preference view consumer willingness to pay is a context sensitive construct that is a consumer s WTP for a product depends on the concrete decision context For example consumers tend to be willing to pay more for a soft drink in a luxury hotel resort in comparison to a beach bar or a local retail store Experimental contextIn laboratory experiments auctions are conducted a premise of the experiment is often that bid WTP See alsoCost benefit analysis Welfare economicsReferencesVarian Hal R 1992 Microeconomic Analysis Vol 3 New York W W Norton Bernard Ruffieux Laurent Muller May 2011 Do price tags influence consumers willingness to pay On the external validity of using auctions for measuring value Article Experimental Economics doi 10 1007 s10683 010 9262 4 Further readingAnderson James C Dipak Jain and Pradeep K Chintagunta 1993 Understanding Customer Value in Business Markets Methods of Customer Value Assessment Journal of Business to Business Marketing 1 1 3 30 Breidert Christoph Hahsler Michael and Reutterer 2006 A Review of Methods for Measuring Willingness to Pay Innovative Marketing 2 4 8 32 Miller Klaus M Hofstetter Reto Krohmer Harley Zhang John Z 2011 How Should Consumers Willingness to Pay be Measured An Empirical Comparison of State of the Art Approaches Journal of Marketing Research Wertenbroch Klaus and Bernd Skiera 2002 Measuring Consumers Willingness to Pay at the Point of Purchase Journal of Marketing Research 39 May 228 41 This economic term article is a stub You can help Wikipedia by expanding it vte
