Determinants of consumers’ response to pay-what-you-want pricing strategy on the Internet

Previous pay-what-you-want pricing research has focused primarily on services in brick-and-mortar settings wherein buyers decide on a price to pay after experiencing the service. Research on this pricing approach in online settings is rare and limited to products, such as digital music. This paper explores the effects of pay-what-you-want pricing on the Internet and extends the scope of investigation to tangible products purchased before consumption. Building on theories in communications and pricing, the authors identify and empirically test two factors that interact with brand familiarity to positively influence online shoppers’ responses to pay-what-you-want pricing: a virtual product experience and a seller-supplied anchor price. The results further indicate that consumers’ online purchase intentions are influenced primarily by their perceived product knowledge, while perceived quality influences their pay-what-you-want prices.