Pay-what-you-want pricing schemes: a self-image perspective

TY - JOUR

T1 - Pay-what-you-want pricing schemes

T2 - a self-image perspective

AU - Kahsay, Goytom Abraha

AU - Samahita, Margaret

PY - 2015/9/1

Y1 - 2015/9/1

N2 - Pay-What-You-Want (PWYW) pricing schemes are becoming increasingly popular. We develop a model incorporating self-image into the buyer’s utility function and introduce heterogeneity in consumption utility and image-sensitivity, generating different purchase decisions and optimal prices across individuals. When a good’s fixed price is lower than a threshold fair value, PWYW can lead to a lower utility. This may result in a lower purchase rate and higher average price, accounting for previously unexplained field experimental evidence. An increase in the threshold value decreases the buyer’s utility and may further lower the purchase rate, resulting in a further increase in purchase price.

AB - Pay-What-You-Want (PWYW) pricing schemes are becoming increasingly popular. We develop a model incorporating self-image into the buyer’s utility function and introduce heterogeneity in consumption utility and image-sensitivity, generating different purchase decisions and optimal prices across individuals. When a good’s fixed price is lower than a threshold fair value, PWYW can lead to a lower utility. This may result in a lower purchase rate and higher average price, accounting for previously unexplained field experimental evidence. An increase in the threshold value decreases the buyer’s utility and may further lower the purchase rate, resulting in a further increase in purchase price.

U2 - 10.1016/j.jbef.2015.05.001

DO - 10.1016/j.jbef.2015.05.001

M3 - Journal article

SN - 2214-6350

VL - 7

SP - 17

EP - 28

JO - Journal of Behavioral and Experimental Finance

JF - Journal of Behavioral and Experimental Finance

ER -