Pay-What-You-Want (PWYW) pricing permits consumers to decide their own payment which might create both opportunities and risks for businesses. Previous studies have examined isolated aspects of PWYW and limited attention has been given to the decision process of consumer behaviour.
This paper introduces and validates a three-stage framework: (1) adoption, (2) willingness-to-pay (WTP), and (3) payment behaviour through evidence from four empirical studies.
Study 1 shows that customer mindset and fairness concern influence PWYW adoption; however, brand familiarity and external reference prices do not. Study 2 demonstrates that willingness-to-pay is jointly shaped by organisational objective and external reference price, with high reference prices increasing willingness-to-pay for not-for-profit sellers. Study 3 finds that descriptive norms increase actual payments when payments are publicly visible. Study 4 replicates the adoption-stage findings in a heterogeneous, non-student sample, supporting the robustness and generalizability of the proposed multi-stage framework.
The research offers three key contributions: (1) it advances a process-oriented perspective of PWYW by integrating psychological, contextual, and social drivers across stages, (2) it extends theory by linking mindset, fairness, and social visibility within a unified framework and (3) it provides actionable managerial insights that firms should recognize adoption as a primarily driven psychological characteristics, while willingness-to-pay and actual payments can be influenced through pricing and social design. This study manifests that PWYW effectiveness depends on coordinated interventions across stages.
A novel multi-stage framework in this study rationalises how consumers move from choosing PWYW to forming WTP and making final payments. The integration of psychological traits (mindset, fairness) which suggest whether consumers enter PWYW, economic cues (reference prices, seller identity) which govern what consumers intend to pay, and social influences (descriptive norms, visibility) which determine what they finally pay, offers a comprehensive account of PWYW behaviour and practical guidance for implementing participative pricing in service settings.
