Giving Customers Decision Rights: A Field Study of Pay-What-You-Want Pricing at a Performing Arts Theatre

36 Pages Posted: 3 Sep 2020

See all articles by Jacob G. Birnberg

Jacob G. Birnberg

University of Pittsburgh - Katz Graduate School of Business

Willie Choi

University of Wisconsin - Madison

Adam Presslee

University of Waterloo - School of Accounting and Finance

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

Birnberg, Jacob G. and Choi, Jongwoon and Presslee, Adam, Giving Customers Decision Rights: A Field Study of Pay-What-You-Want Pricing at a Performing Arts Theatre (July 29, 2020). Available at SSRN: https://ssrn.com/abstract=3662817 or http://dx.doi.org/10.2139/ssrn.3662817

Jacob G. Birnberg

University of Pittsburgh - Katz Graduate School of Business ( email )

Pittsburgh, PA 15260
United States
412-648-1719 (Phone)
412-648-1693 (Fax)

Jongwoon Choi

University of Wisconsin - Madison ( email )

Wisconsin School of Business
975 University Avenue
Madison, WI 53706
United States

Adam Presslee (Contact Author)

University of Waterloo - School of Accounting and Finance ( email )

Waterloo, ON
Canada

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