Pay-What-You-Want in Competition

Margaret Samahita

The B.E. Journal of Theoretical Economics, 2020, vol. 20, issue 1, 16

Abstract: This paper presents an analysis of Pay-What-You-Want (PWYW) in competition which explains its entry and limited spread in the market. Sellers choose their pricing schemes sequentially while consumers share their surplus. The profitability and popularity of PWYW depend not only on consumers’ preferences, but also on market structure, product characteristics and sellers’ strategies. While there is no PWYW equilibrium, given a sufficiently high level of surplus-sharing and product differentiation, PWYW is chosen by later entrants to avoid Bertrand competition. The equilibrium results and their market characteristics are consistent with empirical examples of PWYW.

Keywords: pay-what-you-want; competition; product differentiation; market structure (search for similar items in EconPapers)
JEL-codes: D11 D21 L11 (search for similar items in EconPapers)
Date: 2020
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Working Paper: Pay-What-You-Want in Competition (2015)
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DOI: 10.1515/bejte-2018-0063

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