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Pay What You Want – But Pay Enough! Information Asymmetries and PWYW Pricing

Author

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  • Greiff, Matthias
  • Egbert, Henrik
  • Xhangolli, Kreshnik

Abstract

Pay What You Want (PWYW) pricing has received considerable attention recently. Empirical studies show that when PWYW pricing is implemented buyers do not behave selfishly in a number of cases and that some sellers are able to use PWYW to increase turnover as well as profits. In this paper we present a theoretical model of buyer behavior under asymmetric information about production costs. Our model shows that information asymmetries provide an explanation for the results found in empirical studies.

Suggested Citation

  • Greiff, Matthias & Egbert, Henrik & Xhangolli, Kreshnik, 2013. "Pay What You Want – But Pay Enough! Information Asymmetries and PWYW Pricing," MPRA Paper 52766, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:52766
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    References listed on IDEAS

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    9. Steve Buchheit & Nick Feltovich, 2011. "Experimental Evidence Of A Sunk‐Cost Paradox: A Study Of Pricing Behavior In Bertrand–Edgeworth Duopoly," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(2), pages 317-347, May.
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    Cited by:

    1. Batt, Verena & Holzer, Matthias & Farouq, Jasmin & Bruhn, Manfred, 2018. "Pay What You Want: Eine empirische Untersuchung zur Wirkung des Pricing-Instruments auf Nachfrager," Marketing Review St.Gallen, Universität St.Gallen, Institut für Marketing und Customer Insight, vol. 35(2), pages 96-101.
    2. Greiff, Matthias & Egbert, Henrik, 2016. "A Survey of the Empirical Evidence on PWYW Pricing," MPRA Paper 68693, University Library of Munich, Germany.
    3. Gerpott Torsten J., 2016. "A review of the empirical literature on Pay-What-You-Want price setting," Management & Marketing, Sciendo, vol. 11(4), pages 566-596, December.
    4. Samahita Margaret, 2020. "Pay-What-You-Want in Competition," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 20(1), pages 1-16, January.
    5. Stangl, Brigitte & Kastner, Margit & Prayag, Girish, 2017. "Pay-what-you-want for high-value priced services: Differences between potential, new, and repeat customers," Journal of Business Research, Elsevier, vol. 74(C), pages 168-174.
    6. Elisa Hofmann & Deliah Bolesta & Aya Adra, 2023. "Immorality Judgments and Framing Effects in Voluntary Payment Settings," Jena Economics Research Papers 2023-010, Friedrich-Schiller-University Jena.

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    More about this item

    Keywords

    PWYW pricing; information asymmetry; fairness; buyer behavior;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics
    • M3 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising

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