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

We study how payment decision timing—before versus after product delivery—influences consumer payment under pay-what-you-want pricing. We focus on situations where there is minimal change in consumer uncertainty regarding the product before versus after receiving it. Our theoretical development suggests that people pay more after (versus 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 our theoretical predictions, with preliminary evidence for the moderating effect of product value. An online experiment demonstrated the predicted payment decision timing effect at high product value and a reversal of the effect at low product value across treatment conditions. Another online experiment extended the scope of the previous experiments by examining pay-what-you-want transactions in a charitable donation context (which we label “contribute-what-you-want”): we obtained 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 our theoretical mechanism. Our work has implications for the management of pay-what-you-want schemes for firms, including non-profits, social enterprises, and charities.