Too tired for a good deal: How customer fatigue shapes the performance of Pay-What-You-Want pricing

The current research investigates customers’ reactions to exchanges where they are given complete control in determining the final price in retailing contexts. Specifically, the authors seek to understand how participative pricing mechanisms, such as Pay-What-You-Want (PWYW), influence pricing attitudes and customer purchases. We argue that, despite customers’ favorable attitude toward such pricing strategies, the delegation of control to customers in the price-setting process can be costly for firms. In four studies, we demonstrate that PWYW enhances attitudes toward the pricing strategy but decreases purchase intentions and actual purchases. Furthermore, we isolate perceived pricing effort as the key underlying mechanism and identify customer fatigue level as a critical moderator. Our findings suggest that managers should implement PWYW only in situations where customers have the mental energy required to determine what they want to pay. The present research makes important theoretical contributions to existing literatures on participative pricing and customer fatigue.