Pay-what-you-want pricing: Can it be profitable?

Yong Chao, Jose Fernandez () and Babu Nahata

Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), 2015, vol. 57, issue C, 176-185

Abstract: Using a game theoretic framework, we show that not only can pay-what-you-want pricing generate positive profits, but it can also be more profitable than charging a fixed price to all consumers. Further, whenever it is more profitable, it is also Pareto-improving. We derive conditions in terms of two cost parameters, namely the marginal cost parameter for the seller, and the social preference parameter of a consumer to incorporate behavioral considerations for paying too little compared to her reference price.

Keywords: Pay-what-you-want; Monopoly; Behavioral economics; Voluntary payment (search for similar items in EconPapers)
JEL-codes: C70 D21 D42 L10 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:soceco:v:57:y:2015:i:c:p:176-185

DOI: 10.1016/j.socec.2014.09.004

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