Faculty of Economics and Business Administration Publications Database

Pay What You Want: A New Participative Pricing Mechanism

Natter, Martin
Spann, Martin
Volume: 73
Number: 1
Pages: 44 - 58
ISSN-Print: 0022-2429
Link External Source: Online Version
Year: 2009
Keywords: pay what you want, pay as you wish, participative pricing, service pricing, voluntary contributions

Pay what you want (PWYW) is a new participative pricing mechanism in which consumers have maximum control over the price they pay. Previous research has suggested that participative pricing increases consumers' intent to purchase. However, sellers using PWYW face the risk that consumers will exploit their control and pay nothing at all or a price below the seller's costs. In three field studies, the authors find that prices paid are significantly greater than zero. They analyze factors that influence prices paid and show that PWYW can even lead to an increase in seller revenues.