We investigate the role of identity and self-image consideration under "pay-what-you-want" pricing. Results from three field experiments show that often, when granted the opportunity to name the price of a product, fewer consumers choose to buy it than when the price is fixed and low. We show that this opt-out behavior is driven largely by individuals' identity and self-image concerns; individuals feel bad when they pay less than the "appropriate" price, causing them to pass on the opportunity to purchase the product altogether.fairness | social preferences | behavioral pricing A lthough social norms encourage nonselfish behavior (1-4), self-interest is clearly a powerful motive in markets. This raises two important questions with respect to the economic consequences of nonselfish behavior: Is nonselfish behavior important in markets, and if so, how does it operate?A pricing scheme known as "pay-what-you-want" (PWYW) can help answer both of these questions. To address the first question, nonselfish behavior in the form of PWYW definitely exists in markets. Perhaps the most famous case of PWYW is the release of the band Radiohead's album "In Rainbows" in 2007. Fans were invited to download the album from the band's Web site for any price they chose, including nothing. If fans could get the album for free, why would they pay? However, they did. Hundreds of thousands of fans chose to pay for something they could have received for free, and Radiohead collected hundreds of thousands of dollars from its album sales. Other artists (e.g., Girl Talk) and video game companies (e.g., World of Goo) also have had some level of success in using PWYW. The continued use of PWYW by for-profit organizations (as opposed to, e.g., museums or charities) allows the rejection of the straw man model of pure selfishness in markets. Nevertheless, a closer look at these attempts highlights the importance of the second question: What motivates people to behave nonselfishly in markets? Understanding the reasons for individuals' nonselfish behavior can improve our understanding of how markets work, and help guide the design of institutions based on such behavior.We report results from three field experiments (5, 6) using PWYW to show that individuals' nonselfish behavior is influenced, at least in part, by concerns related to self-image. The basic argument is that people want to maintain a sense of being good and fair. That is, individuals derive utility from prosocial behavior as a signaling mechanism; when an individual behaves prosocially, she is judged more positively by others as well as by herself. The evidence provided in this paper converges to support our proposition that self-image plays an important role in individuals' payment decisions under PWYW.The first piece of evidence presented here is based on a recent field experiment conducted in collaboration with large amusement park that involved selling photos taken during a ride at the park (7). We compared a regular PWYW pricing scheme with a PWYW variation in which half of the re...

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Several papers have documented that when subjects play with standard laboratory "endowments" they make less self-interested choices than when they use money they have either earned through a laboratory task or brought from outside the lab. In the context of a charitable giving experiment we decompose this into two common artifacts of the laboratory: the intangibility of money (or experimental currency units) promised on a computer screen relative to cash in hand, and the distinct treatment of random "windfall" gains relative to earned money. While both effects are found to be significant in non-parametric tests, the former effect, which has been neglected in previous studies, has a stronger impact on total donations, while the latter effect has a greater impact on the probability of donating. These results have clear implications for experimental design, and also suggest that the availability of more abstract payment methods may increase other-regarding behavior in the field.

Previous experimental and observational work suggests that people act more generously when they are observed and observe others in social settings. However, the explanation for this is unclear. An individual may want to send a signal of her generosity to improve her own reputation. Alternately (or additionally) she may value the public good or charity itself and, believing that contribution levels are strategic complements, give more to influence others to give more. We perform the first series of laboratory experiments that can separately estimate the impact of these two social effects, and test whether realized influence is consistent with the desire to influence, and whether either of these are consistent with anticipated influence. Our experimental subjects were given the opportunity to contribute from their endowment to Bread for the World, a development NGO. Depending on treatment, "leader" subjects' donations were reported to other subjects either anonymously or with their identities, and these were reported either before these "follower" subjects made their donation decisions. We find that "leaders" are influential only when their identities are revealed along with their donations, and female leaders are more influential than males. Identified leaders' predictions suggest that are aware of their influence. They respond to this by giving more than either the control group or the unidentified leaders. We find mixed evidence for "reputation-seeking." Electronic supplementary material The online version of this article (