Correlates of Payment Amounts Among Self-Selected Pay-What-You-Want-Buyers

Abstract

This work analyzes actual payments of consumers who consciously choose a Pay-What-You-Want-(PWYW) offer in a situation in which a posted price substitute was also available. In a between-person field experiment, we sell two types of freshly prepared sweet treats. In the first experimental condition, we offer waffles under PWYW and in parallel crêpes at a posted price. In the second condition, we reverse the allocation of the pricing methods to the two focal treats. Our sweet snacks stand attracts a total of 288 different customers of whom 158 deliberately buy an item offered under PWYW. We find that, on average, PWYW buyers pay about 15 % more than the regular price posted for the similar sales alternative. PWYW prices rise, as buyers are more concerned about fairly treating the seller and are less price-conscious. PWYW amounts decrease, as buyers view the PWYW method primarily as an opportunity to make a bargain and know the seller in person. We discuss implications of the results for practical PWYW applications in organizations and for future research.