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2022 | OriginalPaper | Chapter

Willingness to Pay

Authors : Wiebke Klingemann, Ju-Young Kim, Kai Dominik Füller

Published in: Handbook of Market Research

Publisher: Springer International Publishing

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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.

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Title: Willingness to Pay
Authors: Wiebke Klingemann
Ju-Young Kim
Kai Dominik Füller
Publisher: Springer International Publishing
Book: Handbook of Market Research
Print ISBN: 978-3-319-57411-0

Electronic ISBN: 978-3-319-57413-4

Copyright Year: 2022
DOI: https://doi.org/10.1007/978-3-319-57413-4_35