Buyer Behavior in Pay-What-You-Want Pricing

Lucas Stich and Martin Spann

Chapter 5 in New Directions in Behavioral Pricing, 2024, pp 117-141 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Pay-What-You-Want (PWYW) pricing delegates full control over the price to prospective buyers. Contrary to the rational self-interest prediction that all buyers will take the product and pay nothing, field applications of PWYW show that many buyers do not exploit this control but pay positive prices voluntarily. In this chapter, we discuss three key theoretical accounts that explain buyer behavior in PWYW pricing settings. Based on these theoretical accounts, we discuss implications for the design and effectiveness of PWYW as a pricing mechanism. In addition, we discuss opportunities for future research and practice.

Keywords: New Currencies; Loyalty Program Miles as a Virtual Currency; Uncertainty in Value; Choice of Payment Mode; Loyalty Program Management; Affective Price Evaluations; Pain of Paying; Metacognitive Experience In Price Evaluation; The Ease-of-Recall Pricing Effect; The Ease-of-Computation Effect; Hedonic Price Evaluations; Price Fairness; Dual Entitlement; Communicating Price Changes; Communicating Price Differences; Internal Reference Price; Gain–Loss Asymmetry; Price Thresholds; Processing Price Information; Framing Price Changes; Framing Price Differences; Buyers' Purchase Goals; Round Versus Sharp (Odd) Prices; Price Promotion Information Processing; Ease of Computing Price Differences; Size of Right Digit Endings; Absolute Versus Relative Price Differences; Communicating Price Differences; Effects on Quality Inferences And Internal Reference Prices; Post-Promotion Price Expectations; Perceived Fairness of Price Promotions; Pay-What-You-Want (PWYW); Social Preferences; Models of Finitely Repeated Games with Incomplete Information; Signaling; Self-Signaling; Social Signaling; Social Preferences; Partitioned Pricing; Bargains; Efficiency Frontier (search for similar items in EconPapers)
JEL-codes: D4 L11 M31 (search for similar items in EconPapers)
Date: 2024
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