4 ms·
I remember a great discussion my class had in our high school Econ class about why "pay what you want" fails so often: The basic working theory of an economic
by nlh 14y ago
I remember a great discussion my class had in our high school Econ class about why "pay what you want" fails so often:
The basic working theory of an economic exchange between parties is that the exchange happens because both parties feel like they are getting more value post-exchange than pre-exchange. I agree to pay you $5 for a sandwich because I have decided that the sandwich is more valuable to me (in my hungry state) than this $5 bill (even if only marginally so) and you have decided that $5 in the register is better than keeping the bread, cheese and meat in the kitchen. It works. If the sandwich were $20, I might not make the same value judgment. Possibly even if it were $7.
When you throw "pay what you want" into the transaction, in theory, you're actually breaking that structure. I'm no longer getting MORE value from the sandwich than from my money - by definition, I'm getting exactly the same value.
So even though the consumer is deciding on pricing, that subtle feeling of "getting a deal" goes away and consumers on the whole actually feel less intrinsically satisfied with the purchase.
- zizee 14y agoInteresting point. I have only one experience at a restaurant that was "pay what you want" and I found the whole thing uncomfortable. Am I paying too little? Am I paying too much? In the end I decided that the uncertainty detracted from my enjoyment so much that I never returned to that restaurant. I much prefer knowing what the price is upfront. On a related note: I also hate stores where you don't find out the price until you are at the register. It might get a few more dollars out of me the first time I come in, but I won't come back. I guess it makes sense at places like airports where you don't have a huge amount of return customer.
- msrpotus 14y agoGlad I'm not the only one who feels the same way about it. Even if it's only a couple bucks difference, the uncertainty adds a whole layer of anxiety for me.
- dfrey 14y agoPay what you want is stupid because everyone want to pay $0 and only pays more than that because they feel guilty.
- atwebb 14y agoAm I weird in that I'm completely ok paying, what I deem, is a fair price?
- _mulder_ 14y agoExcellent point. But I suspect most people wouldn't be entirely honest with their payment and would infact, consciously or not, factor this in. So they would still pay slightly less than they actually value the product so they still feel like they're getting a good deal too. I.E; paying $4.50 for a sandwich when, if pushed, they would have paid $5. Certainly nobody would over-pay...surely?