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The Pay-What-You-Want Game: What can be learned from the experimental evidence on Dictator and Trust Games?

Author

Listed:
  • Matthias Greiff

    (Justus-Liebig-University Giessen)

  • Henrik Egbert

    (Anhalt University of Applied Sciences)

Abstract

This paper introduces the Pay-What-You-Want game which represents the interaction between a buyer and a seller in a Pay-What-You-Want (PWYW) situation. The PWYW game embeds the dictator game and the trust game as subgames. This allows us to use previous experimental studies with the dictator and the trust game to identify three factors that can influence the success of PWYW pricing in business practice: (i) social context, (ii) social information, and (iii) deservingness. Only few cases of PWYW pricing for a longer period of time have been documented. By addressing repeated games, we isolate two additional factors which are likely to contribute to successful implementations of PWYW as a long term pricing strategy. These are (iv) communication and (v) the reduction of goal conflicts. The central contribution of this study is an attempt to bridge the gap between laboratory experiments and the research on PWYW pricing, which relies largely on evidence from the field. By reviewing the relevant experiments, this study identifies factors crucial for the success of PWYW pricing and provides guidance to developing long-term applications of PWYW pricing.

Suggested Citation

  • Matthias Greiff & Henrik Egbert, 2017. "The Pay-What-You-Want Game: What can be learned from the experimental evidence on Dictator and Trust Games?," Bulgarian Economic Papers bep-2017-05, Faculty of Economics and Business Administration, Sofia University St Kliment Ohridski - Bulgaria // Center for Economic Theories and Policies at Sofia University St Kliment Ohridski, revised May 2017.
    • Handle: RePEc:sko:wpaper:bep-2017-05
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    Cited by:

    1. Guang Yang & Mulin Liu & Mei Cai & Qihua Yin, 2024. "An analytical game perspective model for pay-what-you-want pricing schemes considering consumer fairness," Information Technology and Management, Springer, vol. 25(4), pages 345-365, December.
    2. Richard Reisman & Marco Bertini, 2018. "A novel architecture to monetize digital offerings," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 17(6), pages 453-458, December.

    More about this item

    Keywords

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    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D49 - Microeconomics - - Market Structure, Pricing, and Design - - - Other
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • M30 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - General

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