Definition, Measurement and Determinants of the Consumer's Willingness to Pay: a Critical Synthesis and Directions for Further Research

Differentiated prices, bundling, Web auctions : firms' pricing practices are evolving. When there is no market or for customised pricing, the willingness-to-pay concept seems to be interesting. This article aims at presenting a synthesis of the marketing research stream relative to willingness to pay. First, a definition of the concept is given and compared to other similar concepts, notably reference price and acceptable price. Then the methods of measurement are presented, compared to those used to measure elasticity and criticized. Furthermore, the research on external determinants of willingness to pay is commented. Finally, numerous directions for further research are proposed.willingness to pay, price elasticity, reference price, acceptable price, conjoint analysis, contingent valuation, Vickrey auctions, BDM lottery, prices

Definition, Measurement and Determinants of the Consumer's Willingness to Pay: a Critical Synthesis and Directions for Further Research

International audienceDifferentiated prices, bundling, Web auctions : firms' pricing practices are evolving. When there is no market or for customised pricing, the willingness-to-pay concept seems to be interesting. This article aims at presenting a synthesis of the marketing research stream relative to willingness to pay. First, a definition of the concept is given and compared to other similar concepts, notably reference price and acceptable price. Then the methods of measurement are presented, compared to those used to measure elasticity and criticized. Furthermore, the research on external determinants of willingness to pay is commented. Finally, numerous directions for further research are proposed

Harmful Freedom of Choice: Lessons from the Cellphone Market

This article focuses on the relationship between provider and customer, specifically on the complexity of available contracts in the cellphone market and the ways this complexity might be harmful to consumers. This article aims to elucidate the issues, fleshing them out both as a general phenomenon and as a specific implementation in the cellphone context. The aim is not to provide ultimate solutions, but to show the directions these solutions might take and the difficulties involved

Behavioural Real Estate

The behavioural approach to decision making under uncertainty combines insights from psychology and sociology into economic decision making. It steps away from the normative homo economicus and introduces a positive approach to human decision making under uncertainty. We provide an overview of the main themes in the behavioural real estate literature from the perspective of different market participants. It can be concluded that there seems to be general agreement that behavioural studies can help explain the inefficiency of real estate markets, but a large component of behavioural decision making in the property markets seems to be undiscovered

Quantifying Consumer Interest and Consumer Valuation from Buy-It-Now Offers

An item offered in the buy-it-now offer (BINO) format is sold to the first consumer who is willing to pay the asked price. The lifetime of a BINO, therefore, depends on how many consumers are interested in the item and on how much they value it. In this paper, we model this dependency by combining survival analysis and auction theory. Our model enables sellers to quantify consumer interest and consumer valuation for their items from observing BINO lifetimes only. Further, the influence of covariates (e.g., the item condition) can be investigated. To demonstrate this, we apply our model to a dataset that we have collected from eBay. The dataset consists of 1,821 BINOs of a single product, the iPhone 5S. For this example, we find a new item to attract, on average, 1.26 consumers per day, who have a mean valuation of 384.97 EUR

What Explains Observed Reluctance to Trade? A Comprehensive Literature Review

Valuation gaps and exchange asymmetries are among the most widely studied phenomena in the field of behavioral economics. The purpose of this chapter is to present the current state of the social science literature related to observed reluctance to trade. Numerous theories have been proposed and only a few might be safe to rule out based on the evidence to date. The chapter begins by describing the standard model of preferences, which generally assumes that valuation is independent of ownership status, and then catalogs early findings that seem to suggest that ownership status influences valuation. Early research tested various potential explanations for observed reluctance to trade, and the results did not point to any one theory. Despite this, the literature gravitated toward a single theory — endowment theory, which assumes that preferences are reference-dependent and that individuals are averse to losses. With endowment theory on the rise, some went to work to investigate the conditions that might trigger loss aversion and those that might reduce its effects. Since the early 1990s, a number of alternative theories have been developed and tested by both economists and psychologists including substitution theory, expectation theory, preference uncertainty, mere-ownership theory, enhancement theory, subject misconceptions, and regret avoidance. The chapter walks through each proposed theory, cataloging the evidence for and against. While some theories have garnered more support from the data than others, no single theory yet deserves the title of leading theory. In addition, the phenomenon itself has proved too unstable to warrant general claims that valuations depend on ownership (or expectations over ownership) or that individuals are generally reluctant to trade. Given the current state of the literature, to make such claims is to misrepresent the full set of results. As this chapter makes clear, much more work is required to develop a theory or set of theories worthy of designation as the leading theory

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Online Auctions

The economic literature on online auctions is rapidly growing because of the enormous amount of freely available field data. Moreover, numerous innovations in auction-design features on platforms such as eBay have created excellent research opportunities. In this article, we survey the theoretical, empirical, and experimental research on bidder strategies (including the timing of bids and winner's-curse effects) and seller strategies (including reserve-price policies and the use of buy-now options) in online auctions, as well as some of the literature dealing with online-auction design (including stopping rules and multi-object pricing rules).