Ambiguity of Measured WTP for Quality Improvements When Quantity is Unconstrained : A Note

This paper addresses the issue of how to estimate by contingent valuation methods the maximum price consumers are willing to pay when a new quality is available for a market good for which quantity adjustments are possible. We argue that current practice, which typically does not specify a quantity when asking consumers the price they are willing to pay for a new quality product, fails to identify prospective consumers' behaviour when they are free to adjust the quantity purchased. Theoretical models are discussed for assessing the maximum price consumers are willing to pay in these cases, and econometric approaches to address these situations are discussed