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Willingness to pay

About: Willingness to pay is a(n) research topic. Over the lifetime, 15597 publication(s) have been published within this topic receiving 368639 citation(s). The topic is also known as: WTP. more


Open accessJournal ArticleDOI: 10.1016/S0022-4359(01)00065-3
Abstract: This paper investigates the antecedents and consequences of customer loyalty in an online business-to-consumer (B2C) context. We identify eight factors (the 8Cs—customization, contact interactivity, care, community, convenience, cultivation, choice, and character) that potentially impact e-loyalty and develop scales to measure these factors. Data collected from 1,211 online customers demonstrate that all these factors, except convenience, impact e-loyalty. The data also reveal that e-loyalty has an impact on two customer-related outcomes: word-of- mouth promotion and willingness to pay more. more

Topics: Loyalty business model (63%), Customer retention (61%), Customer delight (60%) more

2,031 Citations

Open accessPosted Content
Botond Koszegi1, Matthew Rabin1Institutions (1)
Abstract: We develop a model that fleshes out, extends, and modifies existing models of reference dependent preferences and loss aversion while accomodating most of the evidence motivating these models. Our approach makes reference-dependent theory more broadly applicable by avoiding some of the ways that prevailing models—if applied literally and without ancillary assumptions—make variously weak and incorrect predictions. Our model combines the reference-dependent gain-loss utility with standard economic “consumption utility†and clarifies the relationship between the two. Most importantly, we posit that a person’s reference point is her recent expectations about outcomes (rather than the status quo), and assume that behavior accords to a personal equilibrium: The person maximizes utility given her rational expectations about outcomes, where these expectations depend on her own anticipated behavior. We apply our theory to consumer behavior, and emphasize that a consumer’s willingness to pay for a good is endogenously determined by the market distribution of prices and how she expects to respond to these prices. Because a buyer’s willingness to buy depends on whether she anticipates buying the good, for a range of market prices there are multiple personal equilibria. This multiplicity disappears when the consumer is sufficiently uncertain about the price she will face. Because paying more than she anticipated induces a sense of loss in the buyer, the lower the prices at which she expects to buy the lower will be her willingness to pay. In some situations, a known stochastic decrease in prices can even lower the quantity demanded. more

Topics: Rational expectations (56%), Willingness to pay (55%), Endowment effect (54%) more

1,928 Citations

Open accessJournal ArticleDOI: 10.1093/QJE/121.4.1133
Botond Koszegi1, Matthew Rabin1Institutions (1)
Abstract: We develop a model of reference-dependent preferences and loss aversion where “gain‐loss utility” is derived from standard “consumption utility” and the reference point is determined endogenously by the economic environment. We assume that a person’s reference point is her rational expectations held in the recent past about outcomes, which are determined in a personal equilibrium by the requirement that they must be consistent with optimal behavior given expectations. In deterministic environments, choices maximize consumption utility, but gain‐loss utility influences behavior when there is uncertainty. Applying the model to consumer behavior, we show that willingness to pay for a good is increasing in the expected probability of purchase and in the expected prices conditional on purchase. In within-day labor-supply decisions, a worker is less likely to continue work if income earned thus far is unexpectedly high, but more likely to show up as well as continue work if expected income is high. more

1,907 Citations

Journal ArticleDOI: 10.1016/0095-0696(92)90019-S
Daniel Kahneman1, Jack L. Knetsch2Institutions (2)
Abstract: Contingent valuation surveys in which respondents state their willingness to pay (WTP) for public goods are coming into use in cost-benefit analyses and in litigation over environmental losses. The validity of the method is brought into question by several experimental observations. An embedding effect is dem(~ns~rated, in which WTP for a good \arie\ depending on whether it is evaluated on its own or as part of a more inclusive category. The ordering of various public issues by WTP is predicted with significant accuracy by independent ratings of the moral satisfaction associated with contributions to these causc~. Contingent valuation responses reflect the willingness to pay for the moral satisfaction ol contributing to public goods, not the economic value of thehe goods. ’ I‘J’I? ,Acxlcrnl~ Pi-L?\ lnc There is substantial demand for a practical technique for measuring the value of non-market goods. Measures of value are required for cost-benefit assessments ot public goods, for the analysis of policies that affect the environment. and for realistic estimates of environmental damages resulting from human action, such as oil spills. In recent years the contingent valuation method (CVM) has gained prominence as the major technique for the assessment of the value of environmental amenities. This paper is concerned with a critique of CVM. The idea of CVM is quite simple: respondents are asked to indicate their value for a public good, usually by specifying the maximum amount they would be willing to pay to obtain or to retain it. The total value of the good is estimated by nlultiplying the average willingness to pay (WTP) observed in the sample by the number of households in the relevant population. This value is sometimes divided into use r~lue and non-use Ll&e by comparing the WTP of respondents who expect to enjoy the public good personally (e.g., benefit from improved visibility or from the increased number of fish in a cleaned up stream) to the WTP ot respondents who have no such expectations. Specific questions are sometimes added to partition non-use value further into the value of retaining an option fol future use, a bequest value, and a pure existence value 1151. The accuracy of the CVM is a matter of substantial practical import, not only in cost-benefit assessments but also in litigation over liability and damages. The validity of the technique is take as a rebuttable presumption in envir~~nmental cases brought in the United States under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA). The research on the method has been reviewed in two authoritative volumes. which offer detailed *This research was supported by Fisheries and Oceans Canada, the Ontario Ministry 01’ thi: Environment. and the Sloan Foundation. Interviews and preliminary statistical analyses were prrformed by Campbell-Goodell Consultants, Vancouver, British Columbia. We benefited from conversations with George Akerlof, James Bieke, Brian Binger, Ralph d‘Arge, Elizabeth Hoffman. Richard Thaler. and Frances van Loo. from a commentary by Glenn Harrison. and from the statistical expertise of Carol Nickerson. more

Topics: Contingent valuation (60%), Willingness to pay (58%), Public good (57%) more

1,873 Citations

Journal ArticleDOI: 10.1177/0013916593255002
Paul C. Stern1, Thomas Dietz2, Linda Kalof3Institutions (3)
Abstract: A social-psychological model is developed to examine the proposition that environmentalism represents a new way of thinking. It presumes that action in support of environmental quality may derive from any of three value orientations: egoistic, social-altruistic, or biospheric, and that gender may be implicated in the relation between these orientations and behavior. Behavioral intentions are modeled as the sum across values of the strength of a value times the strength of beliefs about the consequences of environmental conditions for valued objects. Evidence from a survey of 349 college students shows that beliefs about consequences for each type of valued object independently predict willingness to take political action, but only beliefs about consequences for self reliably predict willingness to pay through taxes. This result is consistent with other recent findings from contingent valuation surveys. Women have stronger beliefs than men about consequences for self, others, and the biosphere, but there i... more

Topics: Contingent valuation (53%), Value (ethics) (52%), Connectedness to nature scale (51%) more

1,821 Citations

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Topic's top 5 most impactful authors

John B. Loomis

71 papers, 6.3K citations

Riccardo Scarpa

65 papers, 3.4K citations

Nick Hanley

56 papers, 3K citations

David A. Hensher

52 papers, 3.8K citations

Rodolfo M. Nayga

47 papers, 1.5K citations

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