Which Proportion of Their Reference Price Are Consumers Willing to Pay in Specific Pay-What-You-Want Conditions? An Extended Abstract

Abstract

Participative pricing mirrors the idea that consumers directly contribute to determining the price paid (Chandran and Morwitz 2005). Pay what you want (PWYW) is such a participative pricing strategy, which becomes increasingly popular in many industries (Johnson and Cui 2013). In a PWYW situation, consumers have complete control over the price determination (Kim et al. 2009) by choosing the price they want to pay. This price can be above or equal to zero (Chao et al. 2014). Recent studies on the effectiveness of PWYW pricing examine determinants of willingness to pay such as satisfaction (Kim et al. 2009; Kunter 2015), consumers’ reference prices, or external reference prices (Johnson and Cui 2013; Soule and Madrigal 2014). The objective of this study is to analyze the proportion of their reference price (RP) consumers are willing to pay in a PWYW situation in specific conditions (involvement, moderate vs. high; salience of the external reference price, yes vs. no; satisfaction, low vs. high; consumers’ mood, neutral vs. positive). This study adds to existing research by considering effects other than just direct ones because no previous studies have simultaneously analyzed direct and interaction effects of such conditions. In addition, effects of involvement and mood have not been studied in a PWYW context yet.