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Pay What You Want (PWYW) pricing ex post consumption: a sales strategy for experience goods

Author

Listed:
  • Henrik Egbert
  • Matthias Greiff
  • Kreshnik Xhangolli

Abstract

Pay What You Want (PWYW) pricing has received considerable attention recently. Empirical studies show that a PWYW pricing mechanism is able to increase a seller?s turnover and profit. This paper addresses PWYW pricing for bundles of experience goods. The paper shows that a PWYW pricing mechanism, if applied to ex post consumption, separates the decision to buy from the decision how much to pay. Information asymmetries about the quality of the good are reduced during the act of consumption so that buyers are informed about the product?s quality when they decide how much to pay. As a consequence, risk-averse buyers who would otherwise refrain from purchasing under a fixed price mechanism can be attracted to purchase under a PWYW pricing ex post consumption (PWYW-EPC) mechanism. In this case, the pricing mechanism itself constitutes a signal. The paper concludes that a PWYW pricing mechanism, applied to ex post consumption, can be a profitable strategy for a seller if she sells bundles of experience goods and if she wants to attract risk-averse buyers for realizing economies of scale in production. JEL Codes: D4 D49 D8 M31

Suggested Citation

  • Henrik Egbert & Matthias Greiff & Kreshnik Xhangolli, 2015. "Pay What You Want (PWYW) pricing ex post consumption: a sales strategy for experience goods," Journal of Innovation Economics, De Boeck Université, vol. 0(1), pages 249-264.
    • Handle: RePEc:cai:jiedbu:jie_016_0249
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    Citations

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    Cited by:

    1. Greiff, Matthias & Egbert, Henrik, 2016. "A Survey of the Empirical Evidence on PWYW Pricing," MPRA Paper 68693, University Library of Munich, Germany.
    2. Egbert, Henrik & Greiff, Matthias, 2023. "Pay-What-You-Want für öffentliche Güter: Eine Fallstudie zu vhs.wissen live [Pay-What-You-Want and Public Goods: a case study of vhs.wissen live]," MPRA Paper 118432, University Library of Munich, Germany.
    3. Roggentin, Agnes Sophie, 2019. "Applicability of Pay-What-You-Want to High-Value Goods – A Case Study," Marketing Review St.Gallen, Universität St.Gallen, Institut für Marketing und Customer Insight, vol. 36(5), pages 56-63.
    4. Weisstein, Fei L. & Choi, Pilsik & Andersen, Peter, 2019. "The role of external reference price in pay-what-you-want pricing: An empirical investigation across product types," Journal of Retailing and Consumer Services, Elsevier, vol. 50(C), pages 170-178.
    5. Reisman, Richard & Payne, Adrian & Frow, Pennie, 2019. "Pricing in consumer digital markets: A dynamic framework," Australasian marketing journal, Elsevier, vol. 27(3), pages 139-148.

    More about this item

    Keywords

    PWYW Pricing; PWYW-EPC; Asymmetric Information; Economies of Scale; Experience Good; Bundling; Ex Post Consumption;
    All these keywords.

    JEL classification:

    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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