Pay What You Like?
35 Pages Posted: 14 Jul 2009 Last revised: 23 Sep 2009
Date Written: April 21, 2009
Abstract
We show that when a seller of a differentiated good offers the product allowing consumers an option to pay what they like, then all consumers will never free ride in equilibrium when their valuations of the good are positive, and, under certain conditions, all will consumers would pay. Further, for the seller this pricing could be more profitable than uniform pricing. If consumers consider the social cost of free riding, or not paying a 'fair' price, then our results show that consumers, rather than free riding, may not opt for this option. Instead, they prefer to purchase the good at the market price from a price-setting firm.
Keywords: pay-what-you-like pricing, self-selection, multidimensional screening
JEL Classification: C72, D11, D21
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Contracts as Reference Points - Experimental Evidence
By Ernst Fehr, Oliver Hart, ...
-
Contracts as Reference Points: Experimental Evidence
By Ernst Fehr, Oliver Hart, ...
-
Contracts as Reference Points - Experimental Evidence
By Ernst Fehr, Oliver Hart, ...
-
By Oliver Hart and John Moore
-
By Oliver Hart and John Moore
-
By Oliver Hart and John Moore
-
Shifting the Blame: On Delegation and Responsibility
By Björn Bartling and Urs Fischbacher
-
Agreeing Now to Agree Later: Contracts that Rule Out But Do Not Rule in
By Oliver Hart and John Moore
-
Agreeing Now to Agree Later: Contracts that Rule Out But Do Not Rule in
By Oliver Hart and John Moore