In this project the Principal Investigators will study a relatively new pricing mechanism that challenges traditional economic theories. Under Pay-What-You-Want (PWYW) the customer determines how much to pay for the good (often including $0). In prior research the PI has found that a considerable portion of customers choose to pay something for goods and has proposed that this behavior is driven, at least in part, by image management concerns. The current project focuses on the role self and social image considerations have in PWYW purchases. A series of experiments will be conducted in which features of the seller-buyer relationship and type of interaction are systematically manipulated to identify the parameters that predict the success (and failure) of PWYW strategies and clarify the respective roles of self and social image concerns in PWYW decisions.
In terms of broader impact, this research will shed light regarding the role of non-standard motivations in the marketplace. In the process it will identify the conditions under which industries can sustain long-term profits using PWYW pricing, suggest how firms might want to go about modifying their pricing models, and suggest still other non-PWYW pricing strategies that might be optimal in light of the drives that make PWYW a profitable price mechanism.