Pay-What-You-Want
Description
In pay-what-you-want settings, typical marketplace dynamics are inverted: buyers, not sellers, determine the price. According to classic economic theory, the rational response of consumers in such situations is to pay nothing, but that is not what happens in actual retail environments. Professor Santana has found that while consumers may vary in their propensity to pay higher or lower prices in general, the context created by sellers can also influence how much consumers will pay. The secret lies in getting consumers who are inclined to pay lower prices to behave in ways that reflect communal (or social) norms versus exchange (or economic) norms when they are making their pricing decisions. Interestingly, even subtle strategies, such as promotional messaging, can affect consumer payments.