Consumer reactions to pay‐what‐you‐want and name‐your‐own‐price mechanisms

Abstract

Pay-what-you-want (PWYW) and name-your-own-price (NYOP) participative pricing mechanisms are becoming more popular among firms. In response, researchers have examined separate outcomes for each mechanism. However, questions remain, especially regarding which mechanism is most beneficial for consumers and companies. Therefore, our main objective is to investigate the role of these participative pricing mechanisms on consumers' pricing satisfaction, pain of payment, and amount of money they intend to pay. We also explore perceived control as mediating the effect of pricing mechanism on pricing satisfaction and pain of payment. Results from two experimental studies indicate that consumers are more satisfied with the pricing mechanism and feel less pain of payment under PWYW offers rather than under NYOP offers, but they intend to pay less than they would have paid for NYOP. External reference prices (ERPs) act as a boundary condition. That is, in both PWYW and NYOP pricing conditions, when retailers use ERPs, consumers intend to pay more but they are less satisfied with pricing and feel more pain of payment. The article concludes with implications for retailers using participative pricing. | INTRODUCTIONRetailers know that when consumers perceive that prices are reasonable, they are more satisfied with their purchases and form increased

The pain of payment: A review and research agenda

“…Several situational variables were identified that can attenuate or exacerbate pain of payment. Consumers experience lower levels of pain of payment when earning money is easy (vs. difficult) for them, for example, when they have an easy (vs. difficult) job (Bagchi & Block, 2011; Soster et al, 2014), when they feel in control of a consumption situation (Wagner et al, 2022), when they feel socially included (Chun & Johnson, 2021), when an expense is anticipated (vs. unanticipated; Besharat & Nardini, 2018), and as more time elapses from when consumers set a budget and when they make a purchase that falls into that budget category (Choe & Kan, 2021).…”

“…Pain of payment is higher when consumers lose more of their financial resources, such as when they pay higher prices for an item and when they spend more money by purchasing a larger basket of goods (Shah et al, 2016; Sheehan & Van Ittersum, 2018). Individuals feel more pain of payment when they are primed with the thoughts of fake (vs. real) money before making a purchase (Aghakhani et al, 2019), when an unanticipated expense is paid by a consumer's time versus money and when an anticipated expense is paid by money versus time (Besharat & Nardini, 2018), when they are offered pay‐what‐you‐want pricing strategies compared to when they pay with name‐your‐own‐pricing techniques (Wagner et al, 2022), when donations are asked in a flat format (e.g., donate $1) compared to when consumers are asked to round up their payments (Kelting et al, 2019), when consumers receive low‐intensity haptic vibration feedback instantly after making payments (Manshad & Brannon, 2021), when the available budget is low and when consumers receive spending feedback during a shopping trip (Sheehan & Van Ittersum, 2018). In addition, Soster et al (2014) showed that consumers experience higher pain of payment from spending an equivalent sum of money when spending depletes their budget versus when money is left in their budget after making the purchase.…”

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

“…In line with this, the breadth of models examined within one research paradigm is rather limited. Most prior research on participative pricing models was based on the analysis of one [3,[5][6][7][8] up to (in five cases) a maximum of three [9][10][11][12][13] pricing models. We argue that our current understanding of pricing model preferences would benefit from directly comparing more pricing models especially given the fact that (1) companies are more or less free to choose from a multitude of pricing models and (2) consumers then have to choose between different pricing models offered on the market.…”

“…In terms of the methodological approach, some prior studies compared pricing models [14][15][16][17], but most do not apply randomized assignment. Only a total number of four papers [9][10][11]13] compares a maximum of three pricing models and employs an experimental approach thus allowing for causal conclusions.…”

Participative pricing and donation programs in a socially concerned supply chain

“…Normally, companies try to extract the utmost willingness to pay of a consumer by offering different services, such as extra legroom on planes (Hagmann et al, 2015). Participative pricing could undercut the competition (Hinterhuber & Liozu, 2014; Schmidt et al, 2015), although it performs and penetrates better on monopolistic and low‐competition market‐place (Wagner et al, 2022). For instance, the rock band Radiohead famously used PWYW to sell one of its albums; the “ In Rainbows ,” online on its website (Chen et al, 2017).…”