Jump to ContentJump to Main Navigation
Show Summary Details
More options …

The B.E. Journal of Theoretical Economics

Editor-in-Chief: Schipper, Burkhard

Ed. by Fong, Yuk-fai / Peeters, Ronald / Puzzello , Daniela / Rivas, Javier / Wenzelburger, Jan

IMPACT FACTOR 2018: 0.173
5-year IMPACT FACTOR: 0.248

CiteScore 2018: 0.24

SCImago Journal Rank (SJR) 2018: 0.163
Source Normalized Impact per Paper (SNIP) 2018: 0.186

Mathematical Citation Quotient (MCQ) 2018: 0.08

See all formats and pricing
More options …

Pay-What-You-Want in Competition

Margaret Samahita
Published Online: 2019-06-08 | DOI: https://doi.org/10.1515/bejte-2018-0063


This paper presents an analysis of Pay-What-You-Want (PWYW) in competition which explains its entry and limited spread in the market. Sellers choose their pricing schemes sequentially while consumers share their surplus. The profitability and popularity of PWYW depend not only on consumers’ preferences, but also on market structure, product characteristics and sellers’ strategies. While there is no PWYW equilibrium, given a sufficiently high level of surplus-sharing and product differentiation, PWYW is chosen by later entrants to avoid Bertrand competition. The equilibrium results and their market characteristics are consistent with empirical examples of PWYW.

Keywords: pay-what-you-want; competition; product differentiation; market structure

JEL Classification: D11; D21; L11


  • Chao, Y., J. Fernandez, and B. Nahata. 2015. “Pay-What-You-Want Pricing: Can It be Profitable?” Journal of Behavioral and Experimental Economics 57: 176–85.Web of ScienceCrossrefGoogle Scholar

  • Chao, Y., J. Fernandez, and B. Nahata. 2017. “Pay-What-You-Want Pricing under Competition: Breaking the Bertrand Trap.” Working paper.Google Scholar

  • Chen, Y., O. Koenigsberg, and Z. J. Zhang. 2017. “Pay-as-You-Wish Pricing.” Marketing Science 36 (5): 780–91.CrossrefWeb of ScienceGoogle Scholar

  • Dana, J., R. A. Weber, and J. X. Kuang. 2007. “Exploiting Moral Wiggle Room: Experiments Demonstrating an Illusory Preference for Fairness.” Economic Theory 33 (1): 67–80.CrossrefGoogle Scholar

  • Economides, N. 1986. “Minimal and Maximal Product Differentiation in Hotelling’s Duopoly.” Economics Letters 21 (1): 67–71.CrossrefGoogle Scholar

  • Fehr, E., G. Kirchsteiger, and A. Riedl. 1998. “Gift Exchange and Reciprocity in Competitive Experimental Markets.” European Economic Review 42 (1): 1–34.CrossrefGoogle Scholar

  • Fehr, E., and K. M. Schmidt. 1999. “A Theory of Fairness, Competition, and Cooperation.” Quarterly Journal of Economics 114 (3): 817–68.CrossrefGoogle Scholar

  • Fischbacher, U., S. Gächter, and E. Fehr. 2001. “Are People Conditionally Cooperative? Evidence from a Public Goods Experiment.” Economics Letters 71 (3): 397–404.CrossrefGoogle Scholar

  • Gächter, S., and B. Herrmann. 2009. “Reciprocity, Culture and Human Cooperation: Previous Insights and a New Cross-Cultural Experiment.” Philosophical Transactions of the Royal Society B: Biological Sciences 364 (1518): 791–806.Web of ScienceCrossrefGoogle Scholar

  • Gautier, P. A., and B. van der Klaauw. 2012. “Selection in a Field Experiment with Voluntary Participation.” Journal of Applied Econometrics 27 (1): 63–84.CrossrefWeb of ScienceGoogle Scholar

  • Gerpott, T. 2017. “Pay-What-You-Want Pricing: An Integrative Review of the Empirical Research Literature.” Management Science Letters 7 (1): 35–62.Google Scholar

  • Gneezy, A., U. Gneezy, G. Riener, and L. D. Nelson. 2012. “Pay-what-you-want, Identity, and Self-Signaling in Markets.” Proceedings of the National Academy of Sciences 109 (19): 7236–40.CrossrefWeb of ScienceGoogle Scholar

  • Gravert, C. 2017. “Pride and Patronage – Pay-What-You-Want Pricing at a Charitable Bookstore.”Journal of Behavioral and Experimental Economics 67: 1–7.CrossrefWeb of ScienceGoogle Scholar

  • Greiff, M., and H. Egbert. 2018. “A Review of the Empirical Evidence on PWYW Pricing.” Economic and Business Review 20 (2): 169–93.Google Scholar

  • Greiff, M., H. Egbert, and K. Xhangolli. 2014. “Pay What You Want – but Pay Enough! Information Asymmetries and PWYW Pricing.” Management & Marketing. Challenges for the Knowledge Society 9 (2): 193–204.Google Scholar

  • Herrmann, B., C. Thöni, and S. Gächter. 2008. “Antisocial Punishment Across Societies.” Science 319 (5868): 1362–67.CrossrefWeb of ScienceGoogle Scholar

  • Hoffman, E., K. McCabe, and V. L. Smith. 1996. “Social Distance and Other-Regarding Behavior in Dictator Games.” The American Economic Review 86 (3): 653–60.Google Scholar

  • Hotelling, H. 1929. “Stability in Competition.” Economic Journal 39 (153): 41–57.CrossrefGoogle Scholar

  • Isaac, R., J. Lightle, and D. Norton. 2015. “The Pay-What-You-Like Business Model: Warm Glow Revenues and Endogenous Price Discrimination.” Journal of Behavioral and Experimental Economics 57: 215–23.CrossrefGoogle Scholar

  • Kahsay, G. A., and M. Samahita. 2015. “Pay-What-You-Want Pricing Schemes: A Self-Image Perspective.” Journal of Behavioral and Experimental Finance 7: 17–28.CrossrefWeb of ScienceGoogle Scholar

  • Kim, J.-Y., M. Natter, and M. Spann. 2009. “Pay What You Want: A New Participative Pricing Mechanism.” Journal of Marketing 73 (1): 44–58.CrossrefWeb of ScienceGoogle Scholar

  • Kim, J.-Y., M. Natter, and M. Spann. 2010. “Kish – Where Customers Pay as they Wish.” Review of Marketing Science 8 (2): 1–12.Google Scholar

  • Kocher, M. G., T. Cherry, S. Kroll, R. J. Netzer, and M. Sutter. 2008. “Conditional Cooperation on Three Continents.” Economics Letters 101 (3): 175–78.Web of ScienceCrossrefGoogle Scholar

  • Krämer, F., K. M. Schmidt, M. Spann, and L. Stich. 2017. “Delegating Pricing Power to Customers: Pay What You Want or Name Your Own Price?” Journal of Economic Behavior & Organization 136: 125–40.CrossrefWeb of ScienceGoogle Scholar

  • Krzyżanowska, M., and J. Tkaczyk. 2016. “Pay-What-You-Want as a Participative Pricing Mechanism: Meta-Analysis of Development and Knowledge Dissemination.” International Journal of Management Cases 18 (2): 21–38.Google Scholar

  • Kurzban, R., and D. Houser. 2005. “Experiments Investigating Cooperative Types in Humans: A Complement to Evolutionary Theory and Simulations.” Proceedings of the National Academy of Sciences 102 (5): 1803–07.CrossrefGoogle Scholar

  • Mak, V., R. Zwick, A. R. Rao, and J. A. Pattaratanakun. 2015. “Pay What You Want” as a Threshold Public Good Provision.” Organizational Behavior and Human Decision Processes 127: 30–43.Web of ScienceCrossrefGoogle Scholar

  • Natter, M., and K. Kaufmann. 2015. “Voluntary Market Payments: Underlying Motives, Success Drivers and Success Potentials.” Journal of Behavioral and Experimental Economics 57: 149–57.Web of ScienceCrossrefGoogle Scholar

  • Park, S., S. Nam, and J. Lee. 2017. “Charitable Giving, Suggestion, and Learning from Others: Pay-What-You-Want Experiments at a Coffee Shop.” Journal of Behavioral and Experimental Economics 66: 16–22.Web of ScienceCrossrefGoogle Scholar

  • Perloff, J. M., and S. C. Salop. 1985. “Equilibrium with Product Differentiation.” The Review of Economic Studies 52 (1): 107–20.CrossrefGoogle Scholar

  • Regner, T. 2015. “Why Consumers Pay Voluntarily: Evidence from Online Music.” Journal of Behavioral and Experimental Economics 57: 205–14.Web of ScienceCrossrefGoogle Scholar

  • Regner, T., and J. A. Barria. 2009. “Do Consumers Pay Voluntarily? The Case of Online Music.” Journal of Economic Behavior & Organization 71 (2): 395–406.CrossrefWeb of ScienceGoogle Scholar

  • Regner, T., and G. Riener. 2017. “Privacy Is Precious: On the Attempt of Lifting Anonymity on the Internet to Increase Revenue.” Journal of Economics & Management Strategy 26 (2): 318–36.CrossrefGoogle Scholar

  • Riener, G., and C. Traxler. 2012. “Norms, Moods, and Free Lunch: Longitudinal Evidence on Payments from a Pay-What-You-Want Restaurant.” The Journal of Socio-Economics 41 (4): 476–83.CrossrefGoogle Scholar

  • Schmidt, K., M. Spann, and R. Zeithammer. 2014. “Pay What You Want as a Marketing Strategy in Monopolistic and Competitive Markets.” Management Science 61(6): 1217–36.Web of ScienceGoogle Scholar

  • Tudón, J. F. 2015. “Pay-What-You-Want because I Do Not Know How Much to Charge You.” Economics Letters 137: 41–44.CrossrefWeb of ScienceGoogle Scholar

About the article

Published Online: 2019-06-08

This work was supported by Jan Wallanders och Tom Hedelius Stiftelse samt Tore Browaldhs Stiftelse, Funder Id: http://dx.doi.org/10.13039/100007439, Grant Number: 2014-0041:1

Citation Information: The B.E. Journal of Theoretical Economics, 20180063, ISSN (Online) 1935-1704, DOI: https://doi.org/10.1515/bejte-2018-0063.

Export Citation

© 2019 Walter de Gruyter GmbH, Berlin/Boston.Get Permission

Comments (0)

Please log in or register to comment.
Log in