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Price fairness and PWYW (pay what you want): a behavioral economics perspective

Abstract

This study proposes a conceptual framework to clarify what leads to successful implementation of the pay what you want (PWYW) pricing mechanism. Psychological factors from the behavioral economics perspective are included in the framework based on the proposition that they play a role in determining how much a consumer will pay. PWYW refers to a participative pricing model in which a consumer can take full control over the price. The goals of this value-based pricing strategy are in line with the goals of revenue management—increasing the opportunity for greater revenues and higher customer satisfaction by understanding consumers’ perceived value. A meta-analysis of real-world examples identifies components, including price fairness perception that can lead people to pay something greater than zero under PWYW.

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Correspondence to Jin Young Chung.

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Chung, J.Y. Price fairness and PWYW (pay what you want): a behavioral economics perspective. J Revenue Pricing Manag 16, 40–55 (2017). https://doi.org/10.1057/s41272-017-0078-0

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  • DOI: https://doi.org/10.1057/s41272-017-0078-0

Keywords

  • behavioral economics
  • service industry
  • participative pricing
  • price fairness
  • pay what you want (PWYW)
  • value-based pricing