Before or After? The Effects of Payment Decision Timing in Pay-What-You-Want Contexts

Abstract

This research studies how payment decision timing – before versus after product delivery – influences consumer payment under pay-what-you-want pricing. The authors focus on situations where there is minimal change in consumer uncertainty regarding the product before versus after receiving it. The theoretical development suggests that people pay more after (versus before) receiving the product when product value is high, but the effect is mitigated when product value is low and reversed when product value is sufficiently low. Results from a laboratory experiment and a field experiment lend support to the theoretical predictions, with preliminary evidence for the moderating effect of product value. An online experiment demonstrated the predicted payment decision timing effect at high product value and a reversal of the effect at low product value. Another online experiment extended the scope of the previous studies by examining pay-what-you-want transactions in a charitable donation context (which authors label “contribute-what-you-want”): the authors obtained evidence for the predicted payment decision timing effect for high product value and a mitigation of the effect for low product value, as well as process evidence for the theoretical mechanism. This work has implications for the management of pay-what-you-want schemes for firms, including non-profits, social enterprises, and charities.

Enhancing the profitability of pay what you want: A study of suggested prices

“…They show that payments after consumption are of higher amounts than payments before consumption because customers can resolve uncertainty about the service process and outcome. KC et al (2023) provide additional support to the results of Viglia et al (2019). Santana and Morwitz (2021) utilize four studies to scrutinize the influence of gender in PWYW.…”

“…Some of them explore the effectiveness of PWYW and its implications for sellers' earnings (Chen et al, 2017; Gneezy et al, 2010; Kim et al, 2009). Others examine the factors that influence customers’ payments, including external reference prices (Kim et al, 2014; Narwal & Nayak, 2020), internal reference prices (Roy et al, 2016; Roy et al, 2021), social preferences (Schmidt et al, 2015), the timing of payment (KC et al, 2023; Viglia et al, 2019), gender (Santana & Morwitz, 2021), and music (Roy & Das, 2022).…”

Work more, pay more? The impact of customer participation on customer pay-what-you-want payments

“…Most important, using PWYW pricing in a service context allows us to test whether different levels of customer participation result in varying financial outcomes. In a typical PWYW pricing situation, customers make their payment after the service was delivered (KC et al, 2023;Viglia et al, 2019) Kim et al, 2009;Santana and Morwitz, 2021), there is also evidence that customer satisfaction may be an antecedent of these payments (e.g. Kim et al, 2009;Schons et al, 2013).…”

“…Most important, using PWYW pricing in a service context allows us to test whether different levels of customer participation result in varying financial outcomes. In a typical PWYW pricing situation, customers make their payment after the service was delivered (KC et al ., 2023; Viglia et al ., 2019), allowing us to examine the effects of low, moderate and high customer participation on these payments. Moreover, several studies have examined customer-related antecedents to PWYW payments (e.g.…”

“…A PWYW pricing strategy allows customers to choose the price they want to pay, which the seller must accept (Kim et al, 2009). PWYW pricing enables customers to determine their payment after a service encounter (KC et al, 2023;Viglia et al, 2019) and shifts complete control over pricing to customers (Kim et al, 2009). Therefore, PWYW payments is uniquely placed to examine customers' financial valuation of a service encounter with different levels of customer participation.…”