Pay-what-you-want choices appear to be linked to self image

Apr 24, 2012 by Bob Yirka report

(Phys.org) -- Panera, the national restaurant chain most famous for its bread, has been in the news of late because they’ve decided to test the concept of allowing customers to pay whatever they want for bread, sandwiches and salads. The concept has proved so successful that Panera plans to open more restaurants that do likewise. To find out why such an idea might work, a group of researchers put together several field experiments to test their belief that the amount people pay for a pay-what-you-want (PWYW) opportunity, likely depends on their desire to boost their own self image. They have published a paper documenting their findings in Proceedings of the National Academy of Sciences.

In the first experiment riders at an amusement park were given the opportunity to buy pictures of themselves on the ride and were told they could pay whatever they wanted. Some were also told that half the proceeds would go to a charity; in those cases customers quite often paid more than those that weren’t told about the charity, though the number of sales were lower.

In a second experiment, some customers on boat rides were asked to pay $15, some $5 and the others whatever they wanted, for pictures of themselves. Not surprisingly, the $15 group had few takers, while the $5 option proved popular, even more so than the PWYW option, as more chose to pass on the photos altogether when given the opportunity to pay whatever they liked.

In the third experiment, diners at a restaurant were asked to pay whatever price they chose for their meal, but were split into two groups. One group paid the owner of the restaurant directly, while the other group was allowed to pay privately by dropping an envelope into a box. Surprisingly, the group that was able to pay anomalously generally paid more than did those that paid the owner directly.

The researchers say taken as a whole, these experiments show that people are motivated by several factors when presented with a PWYW opportunity; the most basic of which, is the desire to uphold their opinion of themselves. Giving more than is necessary in an anonymous way causes people to feel good about themselves. On the other hand, the offer is less appealing when being asked to pay in view of others, such as fellow patrons or the owner of a restaurant. In such a scenario, people feel forced into paying a certain price. They also shy away from opportunities when they feel pressured to buy at a price that is too high, hence those that choose to not buy at all, even when allowed to pay whatever they wanted.

Explore further: New poll reveals what Americans fear most

More information: Pay-what-you-want, identity, and self-signaling in markets, PNAS, Published online before print April 23, 2012, doi: 10.1073/pnas.1120893109

Abstract
We investigate the role of identity and self-image consideration under “pay-what-you-want” pricing. Results from three field experiments show that often, when granted the opportunity to name the price of a product, fewer consumers choose to buy it than when the price is fixed and low. We show that this opt-out behavior is driven largely by individuals’ identity and self-image concerns; individuals feel bad when they pay less than the “appropriate” price, causing them to pass on the opportunity to purchase the product altogether.

Related Stories

Restaurant customers willing to pay more for local food

Oct 26, 2010

Not only are restaurant patrons willing to pay more for meals prepared with produce and meat from local providers, the proportion of customers preferring local meals actually increases when the price increases, ...

Recommended for you

Why has Halloween infiltrated Australian culture?

1 hour ago

Halloween appears to have infiltrated Australian culture, and according to a University of Adelaide researcher, the reason for its increasing popularity could run much deeper than Americanisation.

The hidden world of labor trafficking

2 hours ago

When it comes to human trafficking, we often hear about victims being kidnapped or violently taken from their homes. But what about people who are forced into labor in the U.S.?

New poll reveals what Americans fear most

21 hours ago

Chapman University has initiated the first comprehensive nationwide study on what strikes fear in Americans in the first of what is a planned annual study. According to the Chapman poll, the number one fear in America today ...

Study shows how texas campus police tackle stalking

21 hours ago

One out of every five female students experience stalking victimization during their college career, but many of those cases are not reported to police, according to a study by the Crime Victims' Institute ...

How large-scale technology projects affect knowledge

Oct 21, 2014

What do an accelerator complex at Cern, a manufacturing center in 19th century Philadelphia and lotus cultivation during the Qing dynasty all have in common? All such activities generate knowledge and know-how. ...

User comments : 4

Adjust slider to filter visible comments by rank

Display comments: newest first

Tangent2
3.7 / 5 (3) Apr 24, 2012
"Surprisingly, the group that was able to pay anomalously generally paid more than did those that paid the owner directly."

I think you mean anonymously.
Valentiinro
not rated yet Apr 25, 2012
"Surprisingly, the group that was able to pay anomalously generally paid more than did those that paid the owner directly."

I think you mean anonymously.


It's both!

Good job spotting that, I think my brain's auto-correct fixed it up for me.
NeutronicallyRepulsive
not rated yet Apr 25, 2012
It really works. Not only PWYW. When I'm paying in restaurant directly to a waiter, I tend to pay less than in a case of an anonymous payment. So it works even in those cases, when there is a lower limit set.
AWaB
not rated yet Apr 25, 2012
I'm really surprised by the higher payments by the anonymous patrons. I would be interested to know if there were fewer who paid in that group but the gross revenue was greater due to higher payments. This would make sense in the fact that many people tip better for a better meal / service / experience at a restaurant. Maybe this is part of why people did pay more since there was no tip involved.