Management Accounting Section Midyear Meeting

Giving Customers Decision Rights: A Field Study of Pay-What-You-Want Pricing at the Box Office

• In Event: Control Systems II

Abstract

We conduct a field study at a performing arts center offering pay-what-you-want (PWYW) pricing as one of several pricing options to purchase tickets to examine the effects of PWYW on consumer attraction and future consumption behavior. While offering PWYW in this setting introduces multiple layers of self-selection, we find PWYW attendees are not a homogeneous group. Rather, we observe two distinct types of attendees varying in whether they view PWYW as more of an economic or a social exchange. We also find the effects of PWYW on future consumption behavior are asymmetric. While PWYW attendees do not subsequently become new season subscribers, incumbent season subscribers canceled their subscriptions with plans to use PWYW in the future, resulting in potentially lost revenues and a smaller season subscriber base. Thus, using PWYW as part of a mixed pricing strategy may be especially costly when firms rely on dedicated patronage by consumers.

Authors

• Jacob G Birnberg, University of Pittsburgh

• Jongwoon Choi, University of Wisconsin-Madison

• Adam Presslee, University of Waterloo