Paying Before or Paying After? Timing and Uncertainty in Pay-What-You-Want Pricing

Abstract

Pay what you want (PWYW) is a relatively new and promising pricing mechanism, where consumers have full control over the price they pay. It can potentially increase profits, but its practical applications have produced mixed results. The time of payment, and its implications for consumer uncertainty, might constitute an important determinant of the profitability of such pricing schemes for service providers. A large field experiment conducted in conventional and fast-food restaurants provides initial support that paying after consumption increases PWYW amounts. A laboratory study then details the underlying psychological process; payments after consumption help resolve uncertainty about the service process and service outcome. Another field experiment affirms these insights and further shows that PWYW after consumption, compared with fixed pricing, can increase profitability due to enhanced service capacity utilization. By detailing how timing and uncertainty reduction affect consumers' chosen payments, this article contributes to PWYW research in particular, as well as more general literature pertaining to the dynamics that affect consumers' service experiences and service pricing studies.

Predicting consumers’ cheating behavior. The role of mental representation of goods and psychological ownership

“…Our research further extends this literature by demonstrating how the effect of postponed payments on consumers’ cheating behaviors is more severe for hedonic purchases. This makes new payment systems with heavily consumer involvement such as pay‐what‐you‐want (Viglia, Maras, Schumann, & Navarro‐Martinez, ) more risky for hedonic purchases.…”

Empathic cultural consumers: Pay what you want in the theater

“… Timing . Payments appear to be higher when they are made after having consumed the good or service (Kim et al ., 2014; Regner, 2015; Viglia et al ., 2019). However, this effect seems to be clearly mediated by the level of satisfaction obtained (Gerpott, 2016, 578).…”

“…Although this strategy is not nearly as common as the traditional fixed price system, it has become increasingly popular in recent years and PWYW experiences have proliferated, especially in the culture and leisure markets. Examples of PWYW experiences that have attracted scholarly interest include the online music sales practices of the rock band Radiohead and the Magnatune record label (Regner and Barría, 2009;Regner, 2015); Google Answers (Rafaeli et al, 2007;Regner, 2014); open access publishing (Spann et al, 2017); sales campaigns by hotels and travel agencies (Gautier and Van der Klaauw, 2012;León-Medina et al, 2012); photo sales in amusement parks and tourist tour boats (Gneezy et al, 2010;Gneezy et al, 2012); bookstores (Gravert, 2017); sales of digital creations (Jung et al, 2014); consumption in certain restaurants, cafes and doughnut shops (Riener, 2008;Kim et al, 2009;Kim et al, 2010;Gneezy et al, 2012;Riener and Traxler, 2012;Jung et al, 2014;Jung et al, 2017;Viglia et al, 2019), supermarkets (Jung et al, 2017) and tickets in certain cultural venues such as cinemas (Kim et al, 2009) and museums (Jung et al, 2014). 2 The PWYW system is attractive to many people who see it as an innovative, nonconventional strategy (Kim et al, 2009).…”

Pricing in Consumer Digital Markets: A Dynamic Framework

“…First, consumers are empowered with the pricing decision, making a decision on the price after experiencing the product and therefore reflecting their in-use value. Empirical evidence highlights the benefits of paying after consumption, as consumer uncertainty is reduced (e.g., Viglia et al, 2019, Greiff & Egbert, 2016b. Reciprocity is encouraged, as customers learn that their generosity is rewarded with premium offers and perks from the supplier.…”

“…Further, in monopolistic markets, consumers may fear that unfair payments may drive the supplier out of the market ( Schmidt et al, 2015 ). The timing of pricing decision is also important, as payment after consumption eliminates a perceived consumer risk of unmet expectations ( Egbert et al, 2015 ;Viglia et al, 2019 ).…”