Giving Customers Decision Rights: A Field Study of Pay-What-You-Want Pricing at a Performing Arts Theatre
36 Pages Posted: 3 Sep 2020
Date Written: July 29, 2020
Abstract
We conduct a field study at a performing arts theatre offering pay-what-you-want (PWYW) pricing as one of several pricing options to purchase tickets. While offering PWYW in this setting introduces multiple layers of self-selection, we find PWYW attendees are not a homogeneous group. Specifically, attendees’ identities vary in the extent they view PWYW as an economic transaction or a social exchange. We also find the effect of PWYW on subsequent consumption behavior is asymmetric. PWYW attendees do not subsequently become season subscribers. However, when the PWYW option was offered for a different performance, some season subscribers to that performance canceled their season ticket subscriptions with plans to use PWYW in the future, resulting in potentially lost revenues and a smaller season subscriber base. Thus, using PWYW as part of multiple pricing strategy may be especially costly when firms rely on dedicated patronage by consumers.
Keywords: customer participation, decision rights, identity, pay-what-you-want, pricing
JEL Classification: D12, D22, D4, M41, M2
Suggested Citation: Suggested Citation