Marketing Letters

, Volume 25, Issue 4, pp 409–423

The impact of buyer–seller relationships and reference prices on the effectiveness of the pay what you want pricing mechanism

  • Ju-Young Kim
  • Katharina Kaufmann
  • Manuel Stegemann
Article

Abstract

Pay what you want (PWYW) is a new participative pricing mechanism that delegates the whole price determination to the buyer. Previous research on PWYW suggests that the final prices paid are not only affected by consumer characteristics but also by varying conditions, such as social distance within buyer–seller relationships and the provision of reference prices. Through an online survey and two field experiments, we test varying conditions of PWYW, such as social distance (buyer–seller relationship), provision of external reference price, product value, level of reputation, and duration of an application of PWYW. The results indicate that the provision of an external reference price is advantageous for the seller as the prices paid increase. The seller should also avoid offering products with high product value under PWYW conditions. Furthermore, increasing social distance may decrease the prices paid. Finally, a high level of reputation may be beneficial.

Keywords

Pay what you want Pricing Experimental research Social distance 

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Copyright information

© Springer Science+Business Media New York 2013

Authors and Affiliations

  • Ju-Young Kim
    • 1
  • Katharina Kaufmann
    • 1
  • Manuel Stegemann
    • 2
  1. 1.Department of MarketingGoethe-University FrankfurtFrankfurt am MainGermany
  2. 2.Institute of MarketingUniversity of MuensterMuensterGermany

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