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Pay-what-you-want or mark-off-your-own-price – A framing effect in customer-selected pricing

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  • Schröder, Marina
  • Lüer, Annemarie
  • Sadrieh, Abdolkarim

Abstract

We conduct a natural field experiment to test for the effect of framing on prices paid in two customer-selected price mechanisms. In two framing conditions, we sell a soft drink and provide customers with a reference price for this drink. In the pay-what-you-want (PWYW) condition, customers are told that they can pay much as they want. In the mark-off-your-own-price (MOYOP) condition, customers are told that they can reduce the price by as much as they want. We find that prices are significantly lower and that more customers choose a price of zero in the MOYOP compared to the PWYW condition. We conjecture that the explicit request to reduce the price in MOYOP is a strong signal for customers to adjust their perception of the appropriate price downwards.

Suggested Citation

  • Schröder, Marina & Lüer, Annemarie & Sadrieh, Abdolkarim, 2015. "Pay-what-you-want or mark-off-your-own-price – A framing effect in customer-selected pricing," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 57(C), pages 200-204.
    • Handle: RePEc:eee:soceco:v:57:y:2015:i:c:p:200-204
    DOI: 10.1016/j.socec.2014.10.007
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    References listed on IDEAS

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    1. Christina Gravert, 2014. "Pride and Patronage - The effect of identity on pay-what-you-want prices at a charitable bookstore," Economics Working Papers 2014-04, Department of Economics and Business Economics, Aarhus University.
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    7. Ju-Young Kim & Katharina Kaufmann & Manuel Stegemann, 2014. "The impact of buyer–seller relationships and reference prices on the effectiveness of the pay what you want pricing mechanism," Marketing Letters, Springer, vol. 25(4), pages 409-423, December.
    8. Kim Ju-Young & Natter Martin & Spann Martin, 2010. "Kish: Where Customers Pay As They Wish," Review of Marketing Science, De Gruyter, vol. 8(2), pages 1-14, July.
    9. Riener, Gerhard & Traxler, Christian, 2012. "Norms, moods, and free lunch: Longitudinal evidence on payments from a Pay-What-You-Want restaurant," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 41(4), pages 476-483.
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    11. Klaus M. Schmidt & Martin Spann & Robert Zeithammer, 2015. "Pay What You Want as a Marketing Strategy in Monopolistic and Competitive Markets," Management Science, INFORMS, vol. 61(6), pages 1217-1236, June.
    12. Kim, Ju-Young & Natter, Martin & Spann, Martin, 2014. "Sampling, discounts or pay-what-you-want: Two field experiments," International Journal of Research in Marketing, Elsevier, vol. 31(3), pages 327-334.
    13. repec:feb:artefa:0105 is not listed on IDEAS
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    Cited by:

    1. 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.
    2. Reisman, Richard & Payne, Adrian & Frow, Pennie, 2019. "Pricing in consumer digital markets: A dynamic framework," Australasian marketing journal, Elsevier, vol. 27(3), pages 139-148.
    3. Gerpott, Torsten J. & Schneider, Christina, 2016. "Buying behaviors when similar products are available under pay-what-you-want and posted price conditions: Field-experimental evidence," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 65(C), pages 135-145.
    4. 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.
    5. 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.
    6. Spann, Martin & Stich, Lucas & Schmidt, Klaus M., 2017. "Pay What You Want as a Pricing Model for Open Access Publishing?," Rationality and Competition Discussion Paper Series 10, CRC TRR 190 Rationality and Competition.

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    More about this item

    Keywords

    Participative pricing; Voluntary payment mechanism; Framing; Field experiment;
    All these keywords.

    JEL classification:

    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments

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