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The effects of individual internal versus external reference prices on consumer decisions for pay-what-you-want payments

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  • Kukla-Gryz Anna
  • Zagórska Katarzyna

    (Faculty of Economic Sciences, University of Warsaw, Warsaw, Poland)

Abstract

We empirically investigate the interaction between internal and external reference prices on stated payments in a Pay-What-You-Want (PWYW) scheme. Using results of a vignette experiment with e-books, we show that when an external reference price provided is lower than respondents’ internal reference prices, the average of PWYW payments significantly decreases compared with a situation in which the external reference price is not provided. The relationship is the opposite when the external reference price provided to respondents is higher than their internal reference prices. In such a case, upward pressure is created, thus the average of PWYW payments increases. These results remain true when we control for expected quality of e-books. Additionally, we find that when the external reference price is not provided, the size of PWYW payments depends positively on individual factors such as risk-taking propensity and perceived costs of e-book production.

Suggested Citation

  • Kukla-Gryz Anna & Zagórska Katarzyna, 2017. "The effects of individual internal versus external reference prices on consumer decisions for pay-what-you-want payments," Central European Economic Journal, Sciendo, vol. 4(51), pages 1-17, December.
    • Handle: RePEc:vrs:ceuecj:v:4:y:2017:i:51:p:1-17:n:1
    DOI: 10.1515/ceej-2018-0001
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    More about this item

    Keywords

    Pay-what-you-want; cultural goods; quality uncertainty; reference price; experience goods;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • Z19 - Other Special Topics - - Cultural Economics - - - Other
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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