Pay-what-you-want pricing: Can it be profitable?

B-Tier
Journal: Journal of Behavioral and Experimental Economics
Year: 2015
Volume: 57
Issue: C
Pages: 176-185

Authors (3)

Chao, Yong (not in RePEc) Fernandez, Jose (University of Louisville) Nahata, Babu (not in RePEc)

Score contribution per author:

0.670 = (α=2.01 / 3 authors) × 1.0x B-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

Using a game theoretic framework, we show that not only can pay-what-you-want pricing generate positive profits, but it can also be more profitable than charging a fixed price to all consumers. Further, whenever it is more profitable, it is also Pareto-improving. We derive conditions in terms of two cost parameters, namely the marginal cost parameter for the seller, and the social preference parameter of a consumer to incorporate behavioral considerations for paying too little compared to her reference price.

Technical Details

RePEc Handle
repec:eee:soceco:v:57:y:2015:i:c:p:176-185
Journal Field
Experimental
Author Count
3
Added to Database
2026-01-25