How much would you like to pay? Trust, reciprocity and prosocial motivations in El trato

Abstract

Prosocial motivations and reciprocity are becoming increasingly important in social-science research. While laboratory experiments have challenged the assumption of universal selfishness, the external validity of these results has not been sufficiently tested in natural settings. In this article we examine the role of prosocial motivations and reciprocity in a Pay What You Want (PWYW) sales strategy, in which consumers voluntarily decide how much to pay for a product or service. This article empirically analyses the only PWYW example in Spain to date: the El trato (‘The deal’) campaign launched by the travel company Atrápalo, which offered different holiday packages under PWYW conditions in July 2009. Our analysis shows that, although the majority of the customers did not behave in a purely self-interested manner, they nonetheless did so in a much higher proportion than observed in similar studies. We present different hypotheses about the mechanisms that may explain these findings. Specifically, we highlight the role of two plausible explanations: the framing of the campaign and the attribution of ‘hidden’ preferences to Atrápalo by its customers, which undermined the interpretation of El trato as a trust game.

A review of the empirical literature on Pay-What-You-Want price setting

“…Investigations on age effects contain mixed results. Five studies identify significantly positive interrelations between age and PWYW prices (Borck et al, 2006;Kim et al, 2014a;León et al, 2012;Racherla et al, 2011;Waskow et al, 2016). Regner (2015) finds a negative association, whereas research of Gautier and Van der Klaauw (2012), Gneezy et al (2012) and Riener (2008) suggests an inverted U-shaped pattern.…”

“…Similarly, PWYW sales accompanied by external RP should result in higher payments relative to offers that are not supplemented by external RP nominations. The majority of the em-pirical PWYW studies, which analyze external RP, support these suppositions (Armstrong Soule and Madrigal, 2015;Gautier and Van der Klaauw, 2012 (in case of incidental customer encounters with PWYW offers); Jang and Chu, 2012; (in case of hypothetical payments); Kim et al, 2014a;Krawczyk et al, 2015;Lee et al, 2011Lee et al, , 2015León et al, 2012;Parvinen et al, 2013;Perfecto et al, 2013;Perfecto et al, 2014;Pöyry and Parvinen, 2014;Pöyry et al, 2013;Regner and Barria, 2009;Riener, 2008). Furthermore, several PWYW studies, in which customers were provided with information on the variable production costs of the goods offered, find significantly positive correlations between the level of the stated direct costs -which can be regarded as a special variant of external RP -and the level of voluntary customer payments (Jang and Chu, 2012;Kim et al, 2014a;Krämer et al, 2015;Schmidt et al, 2015; for an insightful theoretical analysis of this association see Greiff et al, 2014).…”

“…Instead, the distribution of voluntarily paid prices should be specifically examined in subgroups of consumers, who completely voluntarily decided to enter into a PWYW context. In this regard the results of Gautier and Van der Klaauw (2012) and León et al (2012) reveal that even in the case of self-selected participants a non-anonymous PWYW design leads to significantly lower payments than an anonymous approach. These studies argue that a non-anonymous process mainly attracts consumers who look for a bargain relative to standard fixed prices (Kunter, 2015) and therefore are even prepared to disclose their identity.…”

“…-Fairness of external RP: If customers are convinced that the external RP quoted by sellers are fair, credible or plausible in the sense that they reflect standard fixed prices currently charged for the focal good in the relevant market or average PWYW amounts paid by other buyers or the good's direct production costs with sufficient precision, then the external RP level should have positive impacts on offer acceptance rates and voluntary payment amounts. However, in a situation, in which buyers perceive external RP as being unfair, implausible, extreme outliers and not cost-oriented, such external RP effects should be absent or even become negative (Gautier and Van der Klaauw, 2012;Greiff and Egbert, 2016;Johnson and Cui, 2013;Kim et al, 2014a;Krawczyk et al, 2015;León et al, 2012;Weisstein et al, 2016). Fairness perceptions of external RP under PWYW conditions should, in turn, to a large extent depend on the image of sellers from the perspective of buyers (see chapter after next).…”

“…Otherwise, in contexts where customers pay before consumption satisfaction is likely to exert a clear influence on prices paid only if buyers are already very familiar with the peculiarities of the purchased service or product and have therefore formed a stable evaluation of the offering and/or its supplier. A total of nine studies find that buyer satisfaction is significantly positively correlated with prices paid voluntarily after consumption (see Table 1: Borck et al, 2006;Gautier and Van der Klaauw, 2012;Kim et al, 2009Kim et al, , 2014aLeón et al, 2012;Machado and Sinha, 2012;Racherla et al, 2011;Riener, 2008;Schmidt et al, 2015). Solely, Drevs (2013) and Schons et al (2014) observe no significant association between the two variables.…”