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European Review of Agricultural Economics Advance Access originally published online on November 26, 2007
European Review of Agricultural Economics 2007 34(4):501-515; doi:10.1093/erae/jbm032
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© Oxford University Press and Foundation for the European Review of Agricultural Economics 2007; all rights reserved. For permissions, please email journals.permissions@oxfordjournals.org

Ambiguity of measured WTP for quality improvements when quantity is unconstrained: a note

Alessandro Corsi

University of Torino and CHILD (Centre for Household, Income, Labour and Demographic Economics), Italy

Corresponding author: Alessandro Corsi, Dipartimento di Economia, Università di Torino, Via Po 53, 10124, Torino, Italy. E-mail: alessandro.corsi{at}unito.it

Received June 2005; Revision received August 2007. 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.

Keywords: willingness-to-pay, contingent valuation, quantity adjustments, quality enhancement, quality premium

JEL classification: D12, Q13, C82


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