IIM-Kashipur Study Finds Participative Pricing Model Can Make Consumers Shell Out More

Imagine being given the option to choose the price of a product and paying whatever they pleased. According to IIM-Kashipur experts, this pay-what-you-want pricing approach can be a great way to get customers to spend more by giving them power over the price.

Preeti Narwal, an assistant professor at the Indian Institute of Management (IIM), Kashipur, headed the research team that looked at how customers' moral disengagement from reciprocity concerns reduced their incentive to pay more for products given under the pay-what-you-want paradigm.

In the "participative" pay-what-you-want pricing model, vendors allow customers to actively participate in choosing the price in addition to accepting or rejecting the offer. Customers are supposed to reward the seller with higher prices or, at the very least standard market rates in exchange for exhibiting the proper behaviours.

The IIM-Kashipur team discovered that the expansion of participative pricing to a wide range of products and services across industries, including digital products, hospitality, consulting, and entertainment, among others, is a result of the proliferation of the internet and the growing need for creativity in business processes.