Willingness to pay (economics)

The willingness to pay (Engl. Willingness to pay , WTP) of consumers is a central concept of economics .

definition

In the economic literature, there are essentially three definitions of a consumer's willingness to pay:

1. The willingness to pay corresponds to the maximum price at which a consumer is willing to buy a unit of a good (100% purchase probability, English floor reservation price ).
2. The willingness to pay corresponds to the maximum price at which a consumer is indifferent between buying and not buying (50% purchase probability, indifference reservation price ).
3. The willingness to pay corresponds to the minimum price above which a consumer is definitely no longer willing to buy a unit of a certain product (0% purchase probability, ceiling reservation price ).

In a more abstract version, there is also willingness to pay for goods that are not traded on markets ( non-market goods ). Accordingly, there are no market prices for these goods. Willingness to pay is a general expression of the preferences of an economic subject (a) with regard to gaining an advantage or avoiding a disadvantage and (b) represented as monetary value. Instead of a price for a market good, the willingness to pay can be expressed in the maximum accepted income or tax change.

public goods

In particular in environmental economics , but also, for example, in health economics , willingness-to-pay analyzes are used to:

• Identify preferences for public goods;
• Estimate the distributional effects of public services;
• Conduct cost-benefit analyzes of public spending;
• Find out opportunity costs , for example in the case of environmental uses .

One suspects, however, that the willingness to pay analysis systematically yields underestimated amounts due to the free rider problem. The willingness to pay is therefore also determined as what an individual (a household) would pay if the public service were no longer available to compensate for the lost benefit.

Measurement

Several methods have been developed in economics to measure willingness to pay . A distinction can be made between two types of methods: one type measures the hypothetical willingness to pay (WTP), the other the actual willingness to pay (WTP).

Hypothetical willingness to pay is measured in a hypothetical context; H. the consumers do not need to bear the economic consequences of their stated willingness to pay. The actual willingness to pay is measured in a real buying context (i.e. consumers buy the examined good at the price that they had previously agreed to pay).

See also

• Contingent valuation method
• Reservation price
• Environmental economic evaluation

swell

• Vithala R. Rao (Ed.): Handbook of Pricing Research in Marketing . Edward Elgar Publishing, Cheltenham et al. 2009, ISBN 978-1-8472-0240-6 .

Individual evidence

1. ↑ Gabler's Wirtschaftslexikon , 15th edition, page 3568, ISBN 3-409-30388-X .