Willingness to pay

For willingness to pay to avoid an undesirable feature, see 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.^[1] 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".^[2]

See also

• Cost-benefit analysis
• Welfare economics