The Pay-What-You-Want Game and Laboratory Experiments

Greiff, Matthias and Egbert, Henrik (2016): The Pay-What-You-Want Game and Laboratory Experiments.

Abstract

This paper introduces the Pay-What-You-Want game which represents the interaction between a buyer and a seller in a Pay-What-You-Want (PWYW) situation. The PWYW game embeds the dictator game and the trust game as subgames. This allows us to use previous experimental studies with the dictator and the trust game to identify three factors that can influence the success of PWYW pricing in business practice: (i) social context, (ii) social information, and (iii) deservingness. Only few cases of PWYW pricing for a longer period of time have been documented. By addressing repeated games, we isolate two additional factors which are likely to contribute to successful implementations of PWYW as a long term pricing strategy. These are (iv) communication and (v) the reduction of goal conflicts. The central implication of this study is that the results from experimental economics can provide guidance to developing long-term applications of PWYW pricing.

• Item Type: MPRA Paper
• Language: English
• Keywords: Pay-What-You-Want; PWYW Game; participative pricing; experiments; reciprocity
• Subjects: C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C90 - General; D - Microeconomics > D1 - Household Behavior and Family Economics > D11 - Consumer Economics: Theory; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M2 - Business Economics > M21 - Business Economics; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M3 - Marketing and Advertising > M31 - Marketing

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