Paying before or paying after? Timing and uncertainty in pay-what-you-want pricing

Giampaolo Viglia, Marta Maras, Jan Schumann, Daniel Navarro-Martinez

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Abstract

Pay what you want (PWYW) is a relatively new and promising pricing mechanism, where consumers have full control over the price they pay. It can potentially increase profits, but its practical applications have produced mixed results. The time of payment, and its implications for consumer uncertainty, might constitute an important determinant of the profitability of such pricing schemes for service providers. A large field experiment conducted in conventional and fast-food restaurants provides initial support that paying after consumption increases PWYW amounts. A laboratory study then details the underlying psychological process; payments after consumption help resolve uncertainty about the service process and service outcome. Another field experiment affirms these insights and further shows that PWYW after consumption, compared with fixed pricing, can increase profitability due to enhanced service capacity utilization. By detailing how timing and uncertainty reduction affect consumers’ chosen payments, this article contributes to PWYW research in particular, as well as more general literature pertaining to the dynamics that affect consumers’ service experiences and service pricing studies.
Original languageEnglish
Article number0
Pages (from-to)272-284
Number of pages13
JournalJournal of Service Research
Volume22
Issue number3
Early online date10 Mar 2019
DOIs
Publication statusPublished - 1 Aug 2019

Keywords

  • PWYW
  • time of payment
  • uncertainty
  • profitability
  • services

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