Pay-per-minute pricing: A field experiment comparing traditional and participative pricing mechanisms

Abstract

Several studies have explored the mechanisms that allow customers to participate in the price-setting of products and services. This study contributes to the relevant literature by empirically investigating pay-per-minute pricing in the context of an experience good. Seven hundred forty-two attendees of a temporary science exhibition in Switzerland were randomly allocated to three distinct pricing treatments: pay-per-minute, pay-what-you-want, and fixed pricing. A standardized questionnaire allowed for a comparative evaluation of all three pricing mechanisms. The findings demonstrate that acceptance of pricing mechanisms is influenced by experiential learning; participative pricing is more acceptable to those with firsthand experience. Fixed pricing remains the preferred option for customers to pay; however, pay-per-minute pricing can substantially reduce the average length of stay, without affecting satisfaction with the exhibition and overall shopping expenditure. This finding highlights the potential of pay-per-minute pricing to mitigate congestion issues, which can lead to a reduction in costs. It may also help to enable better social distancing, thus slowing the spread of communicable diseases. Moreover, the inner mechanics of pay-per-minute pricing seem to hold well, as there is a clear relationship between participants enjoying the exhibition and their length of stay.