willingness to pay
{{short description|Maximum price at or below which a consumer will buy one unit of a product}}
{{For|willingness to pay to avoid an undesirable feature|Willingness to accept}}
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.Varian, Hal R. (1992), Microeconomic Analysis, Vol. 3. New York: W. W. Norton. 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".{{Cite journal
| title = Do price-tags influence consumers' willingness to pay? On the external validity of using auctions for measuring value Article
| journal = Experimental Economics
| date = May 2011
| doi = 10.1007/s10683-010-9262-4
| author1 = Bernard Ruffieux
| author2 = Laurent Muller
}}
See also
References
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Further reading
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- 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), [https://www.researchgate.net/publication/242382759_A_Review_of_Methods_for_Measuring_Willingness-to-Pay "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), [https://www.researchgate.net/publication/255851498_How_Should_Consumers'_Willingness_to_Pay_Be_Measured_An_Empirical_Comparison_of_State-of-The-Art_Approaches "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), [https://archive.ama.org/archive/ResourceLibrary/JournalofMarketingResearch(JMR)/documents/6708883.pdf "Measuring Consumers' Willingness to Pay at the Point of Purchase,"] Journal of Marketing Research, 39 (May), 228–41.
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