Pay-What-You-Want (PWYW) pricing schemes are becoming increasingly popular in a wide range of industries. We develop a model incorporating self-image into the buyer's utility function and introduce heterogeneity in consumption utility and image-sensitivity, which generates dierent purchase decisions and optimal prices across individuals. When a good is sold at a xed price higher than a threshold value, a price that the individual thinks is fair, the adoption of PWYW increases his utility and hence results in a weakly higher purchase rate. When a good is sold at a xed price lower than this threshold, however, PWYW can lead to a lower utility. This may result in a lower purchase rate and higher average price, in line with previously unexplained evidence from eld experiments. Moreover, an increase in the threshold value decreases the buyer's utility and may further lower the purchase rate, possibly resulting in a further increase in purchase price. Using simple assumptions of quadratic self-image function and uniformly distributed individual preferences, we investigate the conditions under which PWYW yields higher total welfare. JEL classication: D03, D11, D49, D64, D82.
We manipulate the information subjects can share on the web concerning socially sensitive actions (public good contribution) and visibility (selfie) to determine the effect on social image, as captured by the price subjects demand for publication. The overall conclusion from the experiment is that theory about social reputation can predict subjects' social-signaling behavior. People take costly decisions to "filter" information about themselves (in retrospect) before it is published. We also report results of a more exploratory nature and find that taking a selfie has a strong negative impact on cooperation among frequent selfie takers, but not on other subjects.
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