Pay-What-you-Want Pricing for Digital Goods

Pay What You Want (PWYW) pricing has become a popular pricing strategy. Yet, few studies have directly examined consumer behavior when sellers use this pricing across various products and distribution channels. In this study, we apply the theories of social norms, reference prices and privacy assurances to test various factors that affect consumers' willingness to purchase and pay (WTPP) for mobile applications in a PWYW condition. Two experiments show that social information positively affects WTPP while reference prices negatively affect willingness to pay. In this, consumers tend to be greatly influenced by social information from local groups when compared to global groups. Further, privacy assurances significantly enhance consumers' willingness to pay.

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