"How much would you like to pay?" The effects of participative pricing mechanisms on consumers' behavior

Resumo

Participative pricing mechanisms allow consumers to participate in the price-formation process. This paper empirically investigates two participative pricing mechanisms: pay-what-you-want (PWYW) and name-your-own-price (NYOP). While the former allows consumers to dictate the price they are willing to pay (including zero), the latter gives companies the possibility of setting a threshold price, and reject the consumer’s offer if it is too low. The main purpose of this research is to investigate the role of participative pricing mechanisms on consumer satisfaction, pain of payment, and willingness to pay, as well as the effects of perceived control as an antecedent of satisfaction and pain of payment. The results of two experimental studies show that consumers are more satisfied and feel less pain of payment when a PWYW mechanism is adopted, but they are willing to pay significantly less than when an NYOP mechanism is adopted. However, when retailers use external reference prices, they are able to positively influence consumers’ willingness to pay in both pricing mechanisms; nevertheless, the presence of external reference prices reduce consumers’ satisfaction and increases pain of payment. Finally, we find that consumer satisfaction and pain of payment is mediated by consumers’ perceived control.