Greiff, Matthias Egbert, Henrik Xhangolli, Kreshnik
Year of Publication:
Joint Discussion Paper Series in Economics 04-2013
Pay What You Want (PWYW) pricing has received considerable attention recently. Empirical studies show that if PWYW pricing is implemented, in a number of cases consumers do not behave selfishly and that some producers are able to use PWYW for increasing turnover and profits respectively. In this paper we add information asymmetries to the existing explanations regarding consumer behavior and argue that information asymmetries may account for the results found in empirical studies. Since the success of PWYW pricing depends on the distribution of information, one implication is that optimization strategies with respect to pricing should take information asymmetries into account.