Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/121366
Authors: 
Krämer, Florentin
Schmidt, Klaus M.
Spann, Martin
Stich, Lucas
Year of Publication: 
2015
Series/Report no.: 
SFB/TR 15 Discussion Paper 501
Abstract: 
Pay What You Want (PWYW) and Name Your Own Price (NYOP) are customerdriven pricing mechanisms that give customers (some) pricing power. Both have been used in service industries with high fixed capacity costs in order to appeal to additional customers by reducing prices without setting a reference price. In this experimental study we compare the functioning and the performance of these two pricing mechanisms. We show that both mechanisms can be successfully used to endogenously price discriminate. PWYW can be very successful if there is an additional promotional benefit to using PWYW and if marginal costs are not too high. PWYW is a very aggressive competitive strategy that achieves almost full market penetration. NYOP is a less aggressive strategy that can also be used if marginal costs are high. It reduces price competition and segments the market. Low valuation customers are more likely to use NYOP while high valuation customers prefer a posted price seller.
Subjects: 
Customer-driven pricing mechanisms
Pay What You Want
Name Your Own Price
Competitive Strategies
Marketing
Laboratory Experiment
JEL: 
D03
D21
D22
D40
L11
M31
Document Type: 
Working Paper

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