 Pay What You Want (PWYW) pricing ex post consumption: a sales strategy for experience goodsHenrik Egbert (), Matthias Greiff and Kreshnik Xhangolli Journal of Innovation Economics, 2015, vol. n°16, issue 1, 249-264 Abstract: Pay What You Want (PWYW) pricing has received considerable attention recently. Empirical studies show that a PWYW pricing mechanism is able to increase a seller?s turnover and profit. This paper addresses PWYW pricing for bundles of experience goods. The paper shows that a PWYW pricing mechanism, if applied to ex post consumption, separates the decision to buy from the decision how much to pay. Information asymmetries about the quality of the good are reduced during the act of consumption so that buyers are informed about the product?s quality when they decide how much to pay. As a consequence, risk-averse buyers who would otherwise refrain from purchasing under a fixed price mechanism can be attracted to purchase under a PWYW pricing ex post consumption (PWYW-EPC) mechanism. In this case, the pricing mechanism itself constitutes a signal. The paper concludes that a PWYW pricing mechanism, applied to ex post consumption, can be a profitable strategy for a seller if she sells bundles of experience goods and if she wants to attract risk-averse buyers for realizing economies of scale in production. JEL Codes: D4 D49 D8 M31 Keywords: PWYW Pricing; PWYW-EPC; Asymmetric Information; Economies of Scale; Experience Good; Bundling; Ex Post Consumption (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:cai:jiedbu:jie_016_0249 Access Statistics for this article More articles in Journal of Innovation Economics from De Boeck Université |
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