Willingness to Pay

Wiebke Klingemann (), Ju-Young Kim () and Kai Dominik Füller ()
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Wiebke Klingemann: Karlsruhe Institute of Technology, Institute for Information Systems and Marketing – Services Marketing
Ju-Young Kim: Goethe University Frankfurt, Department of Marketing
Kai Dominik Füller: Karlsruhe Institute of Technology, Institute for Information Systems and Marketing – Services Marketing

A chapter in Handbook of Market Research, 2022, pp 969-999 from Springer

Abstract: Abstract Measuring accurate willingness to pay (WTP) is essential for designing pricing policies, particularly for pricing new products. Neglecting consumers’ WTP may lead to unexploited surplus when prices are set too low or to low demand when prices are set too high. Additionally, information on consumers’ WTP serves as valuable input to estimate sales and for use in optimization models, thus, to maximize profit. To date, various approaches to measure WTP exist that differ regarding their elicitation approach (direct vs. experimental) and whether they rely on stated or revealed preferences (hypothetical vs. actual WTP). This chapter provides an overview of the most common methods for measuring WTP and further discusses determinants of WTP. We further provide a practical illustration of WTP measurement. Therefore, we collected data on consumers’ WTP for a hypothetical new product offer using two stated preference approaches (open-ended questions and dichotomous choice method following a sequential monadic approach) as well as one revealed preference approach (BDM mechanism). We compare the results of these different methods and discuss how to apply WTP measures in practice.

Keywords: Willingness to pay; Stated preference methods; Revealed preference methods; Hypothetical bias; Drivers of WTP (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-319-57413-4_35

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DOI: 10.1007/978-3-319-57413-4_35

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