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Pay-What-You-Want in Competition

Samahita, Margaret LU (2015) In Working Paper / Department of Economics, School of Economics and Management, Lund University
Abstract
Pay-What-You-Want (PWYW) pricing schemes are popular in certain industries and not others. We model the seller's choice of pricing scheme under various market structures assuming consumers share their surplus. We show that the profitability and popularity of PWYW depend not only on consumers' preferences, but also on market structure, product characteristics and sellers' strategies. While there is no equilibrium where PWYW dominates the market, given a sufficiently high level of surplus-sharing and product differentiation, it is chosen by the second mover to avoid Bertrand competition. The equilibrium results and their associated market characteristics are consistent with empirical examples of PWYW
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author
organization
publishing date
type
Working Paper
publication status
published
subject
in
Working Paper / Department of Economics, School of Economics and Management, Lund University
issue
27
pages
85 pages
publisher
Department of Economics, Lund Universtiy
language
English
LU publication?
yes
id
72f61b5b-257c-4b6e-b2d5-63520b853da6 (old id 8051644)
alternative location
http://swopec.hhs.se/lunewp/abs/lunewp2015_027.htm
date added to LUP
2015-10-05 11:52:45
date last changed
2016-04-16 09:08:42
@misc{72f61b5b-257c-4b6e-b2d5-63520b853da6,
  abstract     = {Pay-What-You-Want (PWYW) pricing schemes are popular in certain industries and not others. We model the seller's choice of pricing scheme under various market structures assuming consumers share their surplus. We show that the profitability and popularity of PWYW depend not only on consumers' preferences, but also on market structure, product characteristics and sellers' strategies. While there is no equilibrium where PWYW dominates the market, given a sufficiently high level of surplus-sharing and product differentiation, it is chosen by the second mover to avoid Bertrand competition. The equilibrium results and their associated market characteristics are consistent with empirical examples of PWYW},
  author       = {Samahita, Margaret},
  language     = {eng},
  number       = {27},
  pages        = {85},
  publisher    = {ARRAY(0xa0a62c8)},
  series       = {Working Paper / Department of Economics, School of Economics and Management, Lund University},
  title        = {Pay-What-You-Want in Competition},
  year         = {2015},
}