The browser you are using is not supported by this website. All versions of Internet Explorer are no longer supported, either by us or Microsoft (read more here: https://www.microsoft.com/en-us/microsoft-365/windows/end-of-ie-support).

Please use a modern browser to fully experience our website, such as the newest versions of Edge, Chrome, Firefox or Safari etc.

Pay-What-You-Want in Competition

På svenska

Author

  • Margaret Samahita

Summary, in English

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

Publishing year

2015

Language

English

Publication/Series

Working Paper / Department of Economics, School of Economics and Management, Lund University

Issue

27

Document type

Working paper

Publisher

Department of Economics, Lund University

Topic

  • Economics

Status

Published