Economic Examination of Pay-What-You-Want Pricing Mechanism

It is commonly accepted that in the process of setting price the seller usually dictates his terms and the buyer has no choice but to accept or to reject the offer. However, some entrepreneurs are starting to implement a new method of pricing called «Pay What You Want». This pricing strategy allows the buyer to set any price he wants basing on his perceptions. Is it profitable to use such kind of strategy? What factors have influence on the pricing decisions, made by customers? These are the main problems of the current research. The strategy was examined in real field experiment in a restaurant of Perm city. Customers were offered a dish under PWYW conditions and were able to put any price they want. After that, they were asked to fill in the form with questions concerning their personal characteristics. Later, on the basis of such independent parameters and dependent variable of price, the model of linear regression was constructed. The use of PWYW strategy was considered unprofitable as a main source of revenue in a restaurant. Moreover, the revenue-maximizing configuration of customer characteristics when using «Pay What You Want» strategy was found.