Question

What is your willingness to pay (WTP) for a car repair? What happens to your WTP if you must have your car fixed today or tomorrow for a very important trip at the end of the week? What is your WTP for a rental car in substitution of your own car? What happens to your WTP if the availability of rental cars is very limited these days? Why are your WTPs for each alternative you may have in front of you to still rent a car?

Answer 1

Willingness to Pay is known as the maximum price that the consumer wishes to pay for a particular good or service. It helps the sellers and the buyers to find the most appropriate prices for a product and service. WTP also depends on the demand for the product and the nature of the commodity. The WTP is less for a car repair. However, it depends on nature and the amount of damage.

Moreover, the WTP also show changes depending on them according to the necessity of the service. If the individual needs to get the service today or shortly, they will pay any price for the service or the goods. The WTP will be more if the necessity is urgent. The individual needs the product shortly. On the other hand, the availability of all the substitutes also shows a change in the WTP. The consumers tend to lower their Willingness to Pay if there is a substitute available in the market at a similar price. For example: If the buyer has an option of car rentals, he/she will pay less for the service. It is because there is no urgency for the service. The consumer has found the perfect substitute for the product. However, if there is no substitute or the prices of substitutes are high, the WTP will increase. It is a necessary buyer mentality and human psychology. Hence, the WTP depends on various factors.