Pricing decisions of consumer innovators

Increasing numbers of consumers who engage in the development of new products are selling their innovations on online marketplaces. We contribute to the scarce research on the commercialization activities of consumer innovators by comparing the consumers’ price decisions with the pricing of firms. Our predictions build on the baseline assumption that the price decisions of consumers are influenced by the same motivations that originally prompt them to innovate. We use a sequential mixed-method approach with a quantitative main study and follow-up qualitative research. The quantitative results draw on a matched-pair analysis of 4,242 computer games released on the online game platform Steam. We find that consumer innovators charge lower prices than firms for comparable games and that consumers and firms show different inclinations in aligning prices with the games’ development costs and perceived quality. The subsequent interview study with 29 hobbyist game developers provides clear support for the motivational explanations of consumers’ pricing decisions. The findings contribute to research on consumer innovation marketing and nascent entrepreneurship. They also improve the understanding of welfare effects resulting from increasing commercial activities of consumers.