Explaining payment amounts among self-selected pay-what-you-want-buyers: results from a field experiment in Germany

This work analyses actual payments of consumers who consciously choose a pay-what-you-want (PWYW) offer in a situation in which a posted price substitute was also available. In a between-person field experiment, we sell two types of freshly prepared sweet treats. In the first experimental condition, we offer waffles under PWYW and in parallel crêpes at a posted price. In the second condition, we reverse the allocation of the pricing methods to the two focal treats. Our sweet snacks stand attracts a total of 288 different customers of whom 158 deliberately buy an item offered under PWYW. We find that, on average, PWYW buyers pay about 15% more than the regular price posted for the similar sales alternative. 56% of the PWYW customers pay exactly the price posted for the close substitute sold in addition to the PWYW item. PWYW prices rise, as buyers are more concerned about fairly treating the seller and are less price-conscious. PWYW amounts decrease, as buyers view the PWYW method primarily as an opportunity to make a bargain and know the seller in person. We discuss implications of the results for practical PWYW applications in organisations and for future research.