The Impact of the Pay-What-You-Want Pricing Experience on Customer Behavior: Focus on Willingness to Participate in Value Co-Creation

Abstract

While Pay-What-You-Want (PWYW) gives customers pricing control, prior research has primarily emphasized its financial aspects, leaving its impact on non-financial outcomes, such as post-PWYW customer behavior, largely unexplored. In particular, the non-financial effects of PWYW have not been fully examined after controlling for the effects of increased self-efficacy due to pre-payment service use. We hypothesized that customers with higher self-efficacy due to service use and larger payments in PWYW will demonstrate a stronger willingness to participate in value co-creation. Results of online experiments using a hypothetical scenario centered on new-age music confirmed the hypothesis. This study broadens the scope of PWYW studies in two significant ways. First, it suggests that power derived from service experience and confidence should be distinguished from that derived from pricing mechanisms. Controlling for changes in power derived from service use accurately determines the relationship between PWYW and power. Second, this approach explores non-financial outcomes, particularly the influence of the PWYW experience on customers’ willingness to participate in value co-creation, and provides empirical evidence. Additionally, we provide practical insights for companies considering PWYW adoption, emphasizing the influence of the PWYW experience on customer–provider relations.