Pay-What-You-Want Because I Do Not Know How Much to Charge You

Abstract

With any positive fraction of altruistic consumers in the population who give away any positive fraction of their gains from trade, there exists a high enough level of uncertainty about demand such that the monopolist prefers pay-what-you-want over the traditional monopoly or any other pricing mechanism. Low marginal costs facilitate the adoption of pay-what-you-want. Consumer welfare always increases with pay-what-you-want.

Keywords: Pay-what-you-want, uncertainty, behavioral pricing, participative pricing

JEL Classification: D40, D81, L11