Before or After? The Effects of Payment Decision Timing in Pay-What-You-Want Contexts

Abstract

This research studies how payment decision timing—before versus after product delivery—influences consumer payment under pay-what-you-want (PWYW) pricing. The authors focus on situations where there is minimal change in consumer uncertainty regarding the product before versus after receiving it. The theoretical development suggests that people pay more after (vs. before) receiving the product when product value is high, but the effect is mitigated when product value is low and reversed when product value is sufficiently low. Results from a laboratory experiment and a field experiment lend support to the theoretical predictions, with preliminary evidence for the moderating effect of product value. An online experiment demonstrates the predicted payment decision timing effect at high product value and a reversal of the effect at low product value. Another online experiment extends the scope of the previous studies by examining PWYW transactions in a charitable donation context (which the authors label “contribute what you want”): the authors obtain evidence for the predicted payment decision timing effect for high product value and a mitigation of the effect for low product value, as well as process evidence for the theoretical mechanism. This work has implications for the management of PWYW schemes for firms, including nonprofits, social enterprises, and charities.