Understanding Differences in Customer Willingness to Pay (WTP): Context Effects, Attribute Framing, and Perceptions of Fairness

Abstract

Researchers in marketing have studied customer willingness to pay (WTP) for a variety of goods and services extensively. However, to date there has been limited empirical investigation of environmental factors such as need urgency (demanddriven or circumstantial scarcity of a desired good or service) and agency (whether the purchaser is spending her own money to make the purchase, or money provided by someone else, such as an employer). In addition, factors such as the way price information is framed may have an effect on customer WTP, as might the presentation of incidental price information. In addition, the perceived fairness of a price, or of a change (particularly an increase) in price, may have an effect on customer WTP under some circumstances. Understanding the effect of need urgency, agency, framing, reference pricing, and perceived fairness on customer WTP could help managers optimize pricing and (in the case of fairness) firm reputation.