Pay-what-you-want versus pick-your price: The interplay between participative pricing strategies and consumer's need for cognition

Abstract

We examined the interaction between the need for cognition and participative pricing strategies and their influence on pricing effort, purchase intention, price paid, and sales volume. Using two vignette-based experiments and two field experiments, we manipulate participative pricing strategy at three levels- pay-what-you-want, pick-your-price, and fixed price. Results suggest that- High need for cognition individuals have a higher purchase intention for pay-what-you-want while low need for cognition individuals have a higher intention for pick-your-price. Higher (lower) pricing efforts elicit high purchase intention for individuals with a higher (lower) need for cognition. The average price paid by both low and high need for cognition consumers is not significantly different from the market price. Participative pricing generates more sales volume than a fixed price. The study’s findings have practical implications. Retailers can choose to boost purchase intention by offering participative pricing strategies that match the cognitive orientation of the consumer.