We show that when a seller of a di¤erentiated good o¤ers the product allowing consumers an option to pay what they like, then all consumers will never free ride in equilibrium when their valuations of the good are positive, and, under certain conditions, all will consumers would pay. Further, for the seller this pricing could be more pro table than uniform pricing. If consumers consider the social cost of free riding, or not paying a "fair" price, then our results show that consumers, rather than free riding, may not opt for this option. Instead, they prefer to purchase the good at the market price from a price-setting firm.
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
16265.
Find related papers by JEL classification: D21 - Microeconomics - - Production and Organizations - - - Firm Behavior D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory D4 - Microeconomics - - Market Structure and Pricing C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
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Nahata, Babu & Ostaszewski, Krzysztof & Sahoo, Prasanna, 1999.
"Buffet Pricing,"
Journal of Business,
University of Chicago Press, vol. 72(2), pages 215-28, April.
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