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Voluntary Payments, Privacy and Social Pressure on the Internet: A Natural Field Experiment

Author Info

Listed author(s):
  • Tobias Regner

    ()

    (Max Planck Institute for Economics, Jena)

  • Gerhard Riener

    ()

    (Duesseldorf Institute for Competition Economics (DICE))

Abstract

The emergence of Pay-What-You-Want (PWYW) business models as a successful alternative to conventional uniform pricing brings up new questions related to the task of pricing. We investigate the eect of a reduction of privacy on consumers' purchase decisions (whether to buy, and if so how much to pay) in a natural experiment at an online music store with PWYW-like pricing. Our study extends the empirical evidence of the reduced anonymity eect, previously established for donation or public goods contexts, to a consumption environment. We nd that revealing the name of the customer led to slightly higher payments, while it drastically reduced the number of customers purchasing. Overall, the regime led to a revenue loss of 15%. The experiment suggests that even low levels of social pressure without face to face interaction on customers leads to a reduction of welfare.

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Paper provided by Friedrich-Schiller-University Jena in its series Jena Economic Research Papers with number 2013-032.

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Date of creation: 09 Sep 2013
Handle: RePEc:jrp:jrpwrp:2013-032
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Keywords: Digital content; Voluntary Payments; PWYW; Public goods; Voluntary contributions; Social pressure; Internet; Privacy; Natural experiment;

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Find related papers by JEL classification:
  • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
  • D49 - Microeconomics - - Market Structure, Pricing, and Design - - - Other
  • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
  • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
  • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
  • P14 - Economic Systems - - Capitalist Systems - - - Property Rights

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  1. Cremer, Helmuth & Pestieau, Pierre, 2009. "Piracy prevention and the pricing of information goods," Information Economics and Policy, Elsevier, vol. 21(1), pages 34-42, February.
  2. Stefano DellaVigna & John A. List & Ulrike Malmendier, 2012. "Testing for Altruism and Social Pressure in Charitable Giving," The Quarterly Journal of Economics, Oxford University Press, vol. 127(1), pages 1-56.
  3. Alpizar, Francisco & Carlsson, Fredrik & Johansson-Stenman, Olof, 2008. "Anonymity, reciprocity, and conformity: Evidence from voluntary contributions to a national park in Costa Rica," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1047-1060, June.
  4. Beresford, Alastair R. & Kübler, Dorothea & Preibusch, Sören, 2012. "Unwillingness to pay for privacy: A field experiment," Economics Letters, Elsevier, vol. 117(1), pages 25-27.
  5. Regner, Tobias & Barria, Javier A., 2009. "Do consumers pay voluntarily? The case of online music," Journal of Economic Behavior & Organization, Elsevier, vol. 71(2), pages 395-406, August.
  6. Andreoni, James & Petrie, Ragan, 2004. "Public goods experiments without confidentiality: a glimpse into fund-raising," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1605-1623, July.
  7. James Andreoni & Justin M. Rao & Hannah Trachtman, 2011. "Avoiding The Ask: A Field Experiment on Altruism, Empathy, and Charitable Giving," NBER Working Papers 17648, National Bureau of Economic Research, Inc.
  8. Guido Imbens & Karthik Kalyanaraman, 2012. "Optimal Bandwidth Choice for the Regression Discontinuity Estimator," Review of Economic Studies, Oxford University Press, vol. 79(3), pages 933-959.
  9. Domon, Koji & Yamazaki, Naoto, 2004. "Unauthorized file-sharing and the pricing of digital content," Economics Letters, Elsevier, vol. 85(2), pages 179-184, November.
  10. Hoffman, Elizabeth & McCabe, Kevin & Smith, Vernon L, 1996. "Social Distance and Other-Regarding Behavior in Dictator Games," American Economic Review, American Economic Association, vol. 86(3), pages 653-660, June.
  11. George J. Stigler, 1980. "An Introduction to Privacy in Economics and Politics," University of Chicago - George G. Stigler Center for Study of Economy and State 10, Chicago - Center for Study of Economy and State.
  12. 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.
  13. Regner, Tobias, 2015. "Why consumers pay voluntarily: Evidence from online music," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 57(C), pages 205-214.
  14. Hal R. Varian, 2005. "Copying and Copyright," Journal of Economic Perspectives, American Economic Association, vol. 19(2), pages 121-138, Spring.
  15. repec:feb:framed:0087 is not listed on IDEAS
  16. Vincent Conitzer & Curtis R. Taylor & Liad Wagman, 2012. "Hide and Seek: Costly Consumer Privacy in a Market with Repeat Purchases," Marketing Science, INFORMS, vol. 31(2), pages 277-292, March.
  17. Charness, Gary & Gneezy, Uri, 2008. "What's in a name? Anonymity and social distance in dictator and ultimatum games," Journal of Economic Behavior & Organization, Elsevier, vol. 68(1), pages 29-35, October.
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Cited by:

  1. Greiff, Matthias & Egbert, Henrik, 2016. "A Survey of the Empirical Evidence on PWYW Pricing," MPRA Paper 68693, University Library of Munich, Germany.
  2. 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.
  3. Krämer, Florentin & Schmidt, Klaus M. & Spann, Martin & Stich, Lucas, 2017. "Delegating pricing power to customers: Pay What You Want or Name Your Own Price?," Journal of Economic Behavior & Organization, Elsevier, vol. 136(C), pages 125-140.
  4. Greiff, Matthias & Egbert, Henrik, 2016. "The Pay-What-You-Want Game and Laboratory Experiments," MPRA Paper 75222, University Library of Munich, Germany.
  5. Armstrong Soule, Catherine A. & Madrigal, Robert, 2015. "Anchors and norms in anonymous pay-what-you-want pricing contexts," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 57(C), pages 167-175.
  6. Samahita, Margaret, 2015. "Pay-What-You-Want in Competition," Working Papers 2015:27, Lund University, Department of Economics.
  7. Egbert, Henrik & Greiff, Matthias & Xhangolli, Kreshnik, 2014. "PWYW Pricing ex post Consumption: A Sales Strategy for Experience Goods," MPRA Paper 53376, University Library of Munich, Germany.
  8. Anna Kukla-Gryz & Katarzyna Zagórska, 2017. "The strength of the anchoring effect on Pay What You Want payments: Evidence from a vignette experiment," Working Papers 2017-14, Faculty of Economic Sciences, University of Warsaw.

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