The Control–Effort Trade-Off in Participative Pricing: How Easing Pricing Decisions Enhances Purchase Outcomes

Abstract

Participative pricing strategies may influence consumer purchase decisions; this research proposes specifically that firms’ delegation of pricing decisions to consumers can create a control–effort trade-off. Consumers favor greater pricing control but are deterred by the effort involved in deciding what to pay. Strategies such as pay what you want (PWYW) in turn might reduce purchase intentions due to the effort involved. In contrast, strategies that increase feelings of control but not perceived effort, such as pick your price (PYP) options that let consumers choose from a limited set of prices, could enhance pricing outcomes. A field study and four laboratory experiments confirm these propositions. The findings demonstrate the mixed effects of participative pricing, identify mediating mechanisms that explain these effects, and specify common moderating conditions that shape the outcomes of participative pricing. These results have notable implications for pricing theory and practice.

Gift card types and willingness to spend more

“…pay what you want), this study can further provide meaningful implications for service providers to increase their profitability by using relevant findings of the studies of pay what you want (Viglia et al, 2019;Wang et al, 2021). Consumers in the pricing situation of pay what you want should go through a process that requires some degree of effort when determining the price that they want to pay, and the required effort, in turn, reduces purchase intentions (Wang et al, 2021). It means that although compared to consumers in the pricing situation of pay what you want, those in the case of willingness to spend more may have a relatively low pricing control, their perceived efforts to determine the amount that they want to pay can be considerably relieved.…”

“…Furthermore, following the perspective that the concept of willingness to spend more shares many commonalities with a participative pricing mechanism (e.g. pay what you want), this study can further provide meaningful implications for service providers to increase their profitability by using relevant findings of the studies of pay what you want (Viglia et al , 2019; Wang et al , 2021). Consumers in the pricing situation of pay what you want should go through a process that requires some degree of effort when determining the price that they want to pay, and the required effort, in turn, reduces purchase intentions (Wang et al , 2021).…”

“…Pay what you want is a participative pricing strategy that allows consumers to decide how much they want to pay for a particular product or service. It means that consumers have full control with the highest degree over their spending amounts (Kim et al , 2009; Wang et al , 2021). When consumers pay for products or services with gift cards that already have specific monetary values, they can decide with a relatively high degree how much they can spend more than the given economic value to acquire or experience goods or services.…”

I do not want to set my own price! Indirect effects of emotions and moderation effects of skepticism explain reduced use intentions towards participative pricing models

“…Most research on pricing models examines consumer reactions, for instance, customer experience, within a single pricing model [ 3 , 6 – 8 ]. Until now, only four papers have followed an extended comparative approach and have compared a maximum of three pricing models [ 10 , 11 , 27 ]. Our research extends this fruitful comparative approach by comparing five pricing models and indicates systematic differences between these models within the same methodological approach.…”

Value creation in an algorithmic world: Towards an ethics of dynamic pricing

“…The value of this table is in recognising the range of stakeholders that can impact dynamic pricing. Addressing resistance to dynamic pricing means recognising that consumers are (tacitly) playing an increasing role in the determining of prices (Wang et al, 2021); then it stands that they need to have greater awareness of the ways in which prices are developed. Managers should learn that efforts to impose technologies on consumers, where control creates significant power-imbalance, end up destroying trust (Milne et al, 2009;Taddeo & Floridi, 2018), and therefore value.…”