An innovative price-setting approach: a pay-what-you-want experiment

Abstract

Purpose

Due to high competition in the agricultural industries and heterogeneous products, the setting of prices for direct sales to consumers is difficult. In recent years, pay-what-you-want (PWYW) is discussed as an innovative pricing strategy. This study analyses whether the implementation of a pay-what-you-want strategy can be successful and if there is a willingness to pay from the consumers for wine touristic offers. Furthermore, the study analyses, in general, how suitable experiments are as a research tool.

Design/methodology/approach

A PWYW mechanism creates a situation of strategic decision- making that can be modelled as a game. This can be transferred to an experimental setting. The results were analysed with a two-sided MWU test (Stata, ranksum) in order to determine whether the differences are statistically significant.

Findings

Participants pay positive prices, although theory predicts the opposite. PWYW is a good strategy to analyse the willingness-to-pay for heterogeneous and homogenous services or products. Information or reference prices have no clear influence on the willingness to pay, confirming results of other studies. There is no influence of gender and age on the payments.

Practical implications

In general, consumers have a willingness to pay positive prices for wine- touristic offers. The willingness to pay is not different for people with or without wine knowledge. For the chosen variable information and reference price, wine producers do not have to address target groups differently.

Originality/value

It is the first study which analyses the pay-what-you-want mechanism as a tool for wine touristic activities. In addition, an experimental approach was used to analyse an innovative, consumer-based price-setting strategy.

Citation

Bitsch, L., Hanf, J.H. and Rüdiger, J. (2020), "An innovative price-setting approach: a pay-what-you-want experiment", British Food Journal, Vol. 122 No. 8, pp. 2481-2496. https://doi.org/10.1108/BFJ-07-2019-0504