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8 TABLE 2 Price, Unit Sales, and Revenues Study 1 Study 2 (Cinema Ticket) Study 3 Products Buffet Lunch Regular Ticket Discount Day Ticket Hot Beverages ø Price PWYW in a 6.44** 4.87** 3.11** 1.94** ø Regular unit price in % Price increase b 19.37** 28.49** 29.80** 10.62** Number of units sold PWYW Number of units sold regular % Sales volume increase b 61.14** (n.s.) (n.s.) 6.74 (n.s.) Revenues PWYW in Revenues regular in % Sales value increase b 32.35* (n.s.) (n.s.) 3.14 (n.s.) *p <.05. **p <.01. atest of deviation of prices paid from zero (one sample t-test). btest of different means PWYW and regular (independent sample t-test). Notes: n.s. = not significant. were surprised to find that average PWYW prices paid in Study 3 were significantly higher (p <.01) than average regular prices. Overall, customers paid 10.62% (p <.01) higher prices for hot beverages, 28.72% less (p <.01) for the cinema tickets, and 19.37% less (p <.01) for the restaurant buffet lunch compared with regular prices. The survey data indicate that, on average, consumers paid approximately 86% of their RP ij to the sellers (i.e., a ij is on average.86). A one-way analysis of variance reveals that the average values of the proportion a ij of how much the consumer is willing to discharge of his or her RP ij to the seller differ significantly (p <.01) across the three studies, whereas the average a ij is highest for hot beverages (M = 1.01, SD =.34) and lowest for the cinema (M =.66, SD =.30). At the restaurant, the guests paid an average of 82% of their RP ij for the lunch buffet, with a ij ranging from.07 to 1.67 (SD =.26). The distribution of prices paid shows that only a few customers paid very low prices and that none decided to pay zero in the three studies (see Figure 2). Estimation of model for prices paid. In total, we collected 690 questionnaires during the experimental treatment periods. After elimination of observations with missing price information, 167 observations remained from the restaurant, 171 remained from the cinema, and 270 remained from the delicatessen. We averaged responses to multiple-item scales for all constructs in all our studies. These constructs have been previously used in other studies and show high reliability. The constructs and their Cronbach s alpha levels appear in Table 1. The results indicate that the reliabilities of the constructs are high. Cronbach s alpha for price consciousness is satisfactory for Study 1, but it falls below the cutoff criterion of.70 (Nunnally 1978) in Studies 2 and 3. According to our estimation model (Equation 2), we account for comparability across products by multiplying each driver of a ij by the internal reference price RP ij. The internal reference prices counterbalance different levels of prices paid due to category disparities. Table 3 depicts the results of our model estimation over all field studies and separately for each study. We estimated the parameters of our proposed model using ordinary least squares estimation. Testing the assumptions of the linear regression, we can justify the use of this model. For all our estimations, the condition index is below the cutoff criterion of 30, indicating that multicollinearity is not a problem. The assumptions of linearity, homoskedasticity, independence of errors, and normality of the error distribution are met. The value of R-square indicates that our proposed model explains 62% of the variation of buyer behavior across all field studies and 15% 30% in the separate estimations. In the following, we first discuss the results for our overall model and then provide a more detailed examination of the estimation results of each study separately. As Table 3 shows, fairness positively affects the final price paid p PWYW ij. This finding is in line with H 2 ; people who reported having paid a fair price offered higher prices to the seller. However, H 3 is not supported, because the influence of altruism is not significant. Overall, altruism does not seem to play a considerable role when prices are determined within the PWYW context. Consistent with H 4, satisfaction significantly increases the price that the buyer is willing to pay to the seller. The more satisfied the buyer, the more of the deal profit he or she is willing to give up in favor of the seller. The effect of loyalty is not significant, thus yielding no support for H 5. We discuss this result in more detail when we analyze the studies separately. Consistent with our expectations, both control variables price consciousness and income significantly affect prices paid. Overall, fairness has a significant impact on prices paid, but this result does not hold for the separate studies, as Table 3 suggests. The guests of the restaurant did not pay a higher price to the seller because of concerns for fairness or altruism. Instead, prices paid were solely driven by the buyer s level of loyalty, price consciousness, and income. In contrast to the results from the overall estimation, loyalty is a significant driver of prices paid for the lunch buffet. This might be due to the setting; the face-to-face interaction between customer and waiter is much more distinctive than in the other studies. Furthermore, approximately 70% of the Pay What You Want / 51

10 TABLE 3 Estimation Results Study 1: Study 2: Study 3: Overall Studies Restaurant Buffet Cinema Ticket Hot Beverages Variables a Coefficient SE Coefficient SE Coefficient SE Coefficient SE Intercept.808** ** ** **.161 Fairness.049** ** Altruism **.022 Satisfaction.073** ** Loyalty * Price consciousness.032** * Income.000** ** **.000 R Adjusted R N *p <.05. **p <.01. aall variables (except the constant) are multiplied with the internal reference price RP ij. Notes: Dependent variable = price paid at PWYW. In Study 3, we experimentally provided external reference prices for the second week of the PWYW offering for five products (latte macchiato, espresso doppio, espresso macchiato, coffee, and tea). Therefore, we can test the robustness of our estimation results by including a dummy variable for observations from the second week with reference price information present. We find that the existence of reference price information is significant (coefficient =.131, p <.01) without substantial changes to the parameter estimates of the other variables, as reported in Table 3. Higher prices were paid when the guests of the delicatessen consumed one of the five products whose reference prices were provided. On average, guests provided with a reference price paid 104% (a ij = 1.04) of the regular prices to the seller. According to our estimation results, we conclude that final prices paid are mainly driven by what consumers believe is fair, by their satisfaction with the product or service, by their price consciousness, and by their net income. In addition, an external reference price provided by the seller can have a positive impact on final prices paid. In contrast, altruism and loyalty only partially influence the product prices when consumers have the chance to pay whatever they want for them. Impact on revenues and unit sales. To analyze the impact of the PWYW application on sellers unit sales and revenues, we compared the revenues and sales during the experimental period with an appropriate baseline. Baseline revenues are defined as the measure of average revenues per day derived from the preexperimental observation periods (at the restaurant: 3 weeks of daily data; at the cinema: 53 weeks of daily data; at the deli: 2 weeks of daily data). Figure 3 illustrates the percentage deviation of revenues in the PWYW treatment periods to baseline revenues. In Study 1, on average, revenues (sales value) rose significantly by 32.35% across the experimental days for the restaurant owner (p <.05; see Table 2). Except for one day, PWYW sales were higher than baseline sales, increasing by as much as 61.21%. Although the average price paid was significantly lower than the regular price ( 6.44 versus 7.99; p <.01), the seller could realize more revenue by increasing the number of unit sales (see Figure 3). Overall, we find an increase in unit sales of 61.14% (p <.01). The sales increase is mainly driven by new customers; compared with the average number of new customers at fixed prices (approximately 11 new customers per day), the number of new customers rose to approximately 17 per day for the restaurant. Conducting an independent sample t-test, we find that the increase in the number of new customers is significant (p <.01). In addition, approximately 70% of new customers stated that they would most likely visit the restaurant again. Most of the buyers (87.3%) also stated that their preference for PWYW over a fixed price was medium to high. Thus, we can conclude that the use of PWYW was beneficial for the seller. The seller decided to retain PWYW as a pricing mechanism for the buffet lunch. In Study 2, on average, customers paid 28.49% lower prices on regular days (not a discount day) compared with regular prices (p <.01) and 29.80% lower prices on the discount day (p <.01; see Table 2). As Figure 3 shows, revenues mostly decreased when PWYW was applied. Except for two screenings, the revenues of the cinema suffered strongly both on a regular day and on the discount day (Tuesday). Because of only a few observations (i.e., number of screenings), this finding is not significant. However, in this case, PWYW does not seem to be a profitable pricing mechanism. The large decrease in sales units compared with baseline sales cannot be explained by the application of PWYW, because it was not advertised and consumers became aware of it only after entering the cinema. Therefore, we can explain this sales decrease only by chance. In Study 3, PWYW sales values were higher in 9 of the 12 days (the store was closed on Sunday) at the delicatessen. On average, revenues across the experimental days were approximately 3.14% higher than baseline revenues (not significant) during the promotion period, though Pay What You Want / 53

11 FIGURE 3 Comparison of PWYW Revenues with Baseline A: Study 1: Restaurant Buffet Lunch (relative deviation of PWYW revenues to baseline) B: Study 2: Cinema Ticket (relative deviation of PWYW revenues to baseline) C: Study 3: Hot Beverages (relative deviation of PWYW revenues to baseline) 54 / Journal of Marketing, January 2009

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