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Pay-What-You-Want pricing schemes: A self-image perspective

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  • Kahsay, Goytom Abraha
  • Samahita, Margaret

Abstract

Pay-What-You-Want (PWYW) pricing schemes are becoming increasingly popular. We develop a model incorporating self-image into the buyer’s utility function and introduce heterogeneity in consumption utility and image-sensitivity, generating different purchase decisions and optimal prices across individuals. When a good’s fixed price is lower than a threshold fair value, PWYW can lead to a lower utility. This may result in a lower purchase rate and higher average price, accounting for previously unexplained field experimental evidence. An increase in the threshold value decreases the buyer’s utility and may further lower the purchase rate, resulting in a further increase in purchase price.

Suggested Citation

  • Kahsay, Goytom Abraha & Samahita, Margaret, 2015. "Pay-What-You-Want pricing schemes: A self-image perspective," Journal of Behavioral and Experimental Finance, Elsevier, vol. 7(C), pages 17-28.
    • Handle: RePEc:eee:beexfi:v:7:y:2015:i:c:p:17-28
    DOI: 10.1016/j.jbef.2015.05.001
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    Cited by:

    1. Vahid Ashrafimoghari & Jordan W. Suchow, 2022. "A Game-theoretic Model of the Consumer Behavior Under Pay-What-You-Want Pricing Strategy," Papers 2207.08923, arXiv.org.
    2. Kumar, Satish & Rao, Sandeep & Goyal, Kirti & Goyal, Nisha, 2022. "Journal of Behavioral and Experimental Finance: A bibliometric overview," Journal of Behavioral and Experimental Finance, Elsevier, vol. 34(C).
    3. Heindl, Peter & Kanschik, Philipp, 2016. "Ecological sufficiency, individual liberties, and distributive justice: Implications for policy making," Ecological Economics, Elsevier, vol. 126(C), pages 42-50.
    4. Tobias Regner & Gerhard Riener, 2017. "Privacy Is Precious: On the Attempt to Lift Anonymity on the Internet to Increase Revenue," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 26(2), pages 318-336, June.
    5. Gerpott Torsten J., 2016. "A review of the empirical literature on Pay-What-You-Want price setting," Management & Marketing, Sciendo, vol. 11(4), pages 566-596, December.
    6. Rabbanee, Fazlul K. & Roy, Rajat & Sharma, Piyush, 2022. "Contextual differences in the moderating effects of price consciousness and social desirability in pay-what-you-want (PWYW) pricing," Journal of Business Research, Elsevier, vol. 141(C), pages 13-25.
    7. Rafael Luis Wagner, 2019. "Lowering consumers’ price image without lowering their internal reference price: the role of pay-what-you-want pricing mechanism," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 18(4), pages 332-341, August.
    8. Emili Vizuete-Luciano & Oktay Güzel & José M. Merigó, 2023. "Bibliometric research of the Pay-What-You-Want Topic," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 22(5), pages 413-426, October.
    9. Samahita Margaret, 2020. "Pay-What-You-Want in Competition," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 20(1), pages 1-16, January.
    10. Gravert, Christina, 2017. "Pride and patronage - pay-what-you-want pricing at a charitable bookstore," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 67(C), pages 1-7.
    11. Geneviève Bassellier & Jui Ramaprasad, 2023. "All External Reference Prices Are Not the Same: How Magnitude, Source, and Fairness Shape Payment for Digital Goods," Information Systems Research, INFORMS, vol. 34(4), pages 1761-1774, December.

    More about this item

    Keywords

    Pay-What-You-Want; Self-image; Fairness; Voluntary contribution;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D49 - Microeconomics - - Market Structure, Pricing, and Design - - - Other
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles

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