Price formation in trade based on a voluntary payment

<p>This paper examines consumer behavior in a setting of a trade based on a voluntary payment. More precisely, it focuses on the principles that guide buyers when appraising the product they are purchasing. To achieve this goal the study will focus on the following tasks. Firstly, to identify the role of consumer&#39;s ex ante expectations regarding future consumption. Secondly, to identify the role of the prior experience of purchasing a similar good with a fixed price. Thirdly, to identify the role of evident and non-evident recommended price. And fourthly, to identify the role of the social environment at the moment of purchase, namely, presence or absence of the seller, other consumers, passersby.</p><p>The goal of the research will be achieved through the employment of qualitative methods. That implies conducting an experiment with participant observation and semi-structured in-depth interviews. Although there are numerous theoretical and empirical works concerning such trade, none of them dwell upon the question of how a customer determines the price to be paid. Thus this study tries to explore the theoretical implications of the phenomenon of voluntary payment and to make a contribution to the theory of price formation.</p><p>The key findings of my research are the following: expectations of future consumption of goods strongly influence the amount of money that the purchaser gives to the seller. However, buyers can be attracted by the emotions they would get from the purchase as well. Besides, customers are unlikely to establish price for the product on the basis of previous experience of buying a similar product at a set price. Instead, they try to calculate by themselves what amount of money the seller does deserves. Moreover, customers are likely to set price for the product based on recommended price. Presence of recommended price does not let them to pay less. Finally, different social environment influences the customer and his decision to take part in exchange. When the seller is absent, the purchaser is likely not to buy anonymous goods, as he does not know who the producer is. This, in its turn causes the lack of trust.</p><p>&nbsp;</p><p>&nbsp;</p>