Pay-what-you-want (PWYW) is a participatory pricing mechanism in which buyers can set any price—including zero—for products or services provided by sellers (Kim, Natter and Spann, 2009).
Schmidt, Spann and Zeithammer (2015) and Greiff and Egbert (2018) suggested applying PWYW to goods or services with a low marginal cost of production or supply that provide value for money, such as digital products, like software, music, and e-books; museum and church visits; and tickets for cultural events.
For exhibition services, the marginal cost of supply is usually very low, despite total supply constraints, and visitors are likely to recognize a certain level of value for the service provided. Therefore, exhibition services could be a sector with PWYW efficiency.
Crespo (2019) reported that profits increased by 40% compared to a fixed entrance fee when PWYW was applied to the National Art Museum in Lisbon. Choi and Jin (2020) found that the average amount participants were willing to pay for admission to the National Museum of Modern and Contemporary Art in South Korea increased under PWYW, compared to a fixed pricing setting.
Some studies have incorporated charitable contributions into PWYW to assess changes in consumer willingness to pay compared to the simple PWYW. This study aims to compare respondents’ intention to visit a museum and their chosen prices under different pricing schemes: fixed pricing, PWYW, and PWYW with shared social responsibilities (SSR).
PWYW and the Social Norm
The PWYW examples prompt a question: What motivates people to behave in a non-selfish way under PWYW?
Previous studies interpreted consumer behavior under PWYW by referring to the social norm. To summarize those studies’ results, consumers pay more than zero in PWYW according to prosocial behaviors that are based on social norms. Consumers also have a self-signaling goal where they want to reinforce their belief of being nice by paying a positive price when they do not have to do so. In addition, various factors influence when consumers reveal their responses in a controlled PWYW setting.
PWYW and Charity
Researchers have demonstrated that implementing a charity program can increase consumers’ favorable attitudes toward producers or retailers and their intentions to recommend and purchase from retailers (Barone, Norman and Miyazaki, 2007; Chaabane and Parguel, 2016; De Vries and Dupue, 2018; Hamby, 2016; Lafferty, Goldsmith and Hult, 2004; Robinson, Irmak and Jayachandran, 2012).
We conducted an online survey with the help of the research company, Embrain, which recruited participants from its registered panels. The participants were divided into six groups. For each group, we suggested one of six pricing mechanisms and measured their intention to visit and their suggested price for the admission fee. The six pricing schemes were: 1) fixed pricing, 2) PWYW, 3) PWYW with 1% SSR, 4) PWYW with 50% SSR, 5) PWYW with 99% SSR, and 6) PWYW with donate-what-you-want. The last group was asked about their desired charity ratio in addition to their intention to visit and chosen prices. The number of participants in each group was similar, ranging from 106 to 112. The gender distribution of each group was even.
Findings and Managerial Implications
First, all PWYW cases produced higher values of chosen prices than fixed pricing, while the two different pricing strategies did not significantly differ in intention to visit. The gap in chosen prices between PWYWs and the fixed pricing seems relatively large and, therefore, all PWYWs had higher values of expected total social revenue than that for fixed pricing. Here, total social revenue was defined as a sum of the charitable contribution and the museum admission fee, obtained by multiplying the ratio of those who showed a willingness to visit among the participants of each case to the average chosen prices by those who answered “yes” to visit. The results support the findings of Gneezy et al. (2010); Gneezy et al. (2012); and Park, Nam and Lee (2017), which suggested that PWYW yields greater net revenue than conventional fixed pricing.
As of 2020, 51 of the 68 national and public art museums in South Korea are operating under a free admission policy for all visitors (Ministry of Culture, Sports and Tourism, 2020). The policy has had both positive effects, such as increasing the number of visitors, and negative effects, such as worsening visitors’ attitudes and deteriorating museums’ financial independence (Park, Shin and Hyun, 2019). According to the 2020 Art Market Survey by the South Korean Ministry of Culture, Sports, and Tourism (2020), 92.3% of the national and public art museums’ income comes from local or central government support. The National Museum of Modern and Contemporary Art—the only national art museum in South Korea—has merely 4.5% worth of independent finances; its expenditure and revenue approximately comprise KRW 62.2 billion and KRW 3 billion, respectively (National Museum of Modern and Contemporary Art, Korea, 2020). None of the respondents who expressed an intention to visit across all groups under PWYW suggested a zero admission fee. In addition, the average chosen price in all five PWYW groups was higher than the current admission fee of KRW 4,000. This outcome suggests that South Koreans are aware of the value of the public exhibition service provided by national museums. Considering that our online survey guarantees anonymity, the results indicate that PWYW is likely to be highly effective pricing in exhibition services.
Therefore, this study has important implications for the pricing policies of admission for national and public art museums in South Korea. Although PWYW is risky for the supplier, it can earn higher profits for museums than fixed pricing as long as visitors appreciate the value of the public services.
Second, the average chosen prices in PWYW with charity are larger than that in the simple PWYW. This finding supports Gneezy et al. (2010) in that people pay substantially more when they learn that their payment will benefit a charity. However, we did not obtain results supporting the superiority of PWYW with charity over simple PWYW in terms of willingness to visit. Some SSRs with PWYW had higher values for total social revenue than simple PWYW, but others had lower values. Therefore, it is unclear whether our results support the assertion by Fowler and Thomas (2019) that PWYW with charitable giving has potentially greater additional benefits for the retailer. Such an outcome depends on potential spectators’ intention to visit. In addition, considering the expected revenue only for the museum, all values are smaller in SSRs compared to simple PWYW. Therefore, museums should be cautious when incorporating charitable contributions into PWYW.
Third, our results showed no difference in respondents’ chosen prices among the three fixed-ratio SSR cases and mixed results for intention to visit. These outcomes imply that the majority of our samples was not equity-focused, so their preference for an equal split between the museum and the charity is relatively weak. We noticed that chosen prices in PWYW with charity were larger than that of the simple PWYW. Collectively, the results indicate that participants seem to be sensitive to charity per se, but not to charity ratios. This result aligns with the findings of Jung et al. (2017), who suggested that consumers were sensitive to charitable giving but insensitive to the payment percentage allocated to charity.
Among the three ratios (1%, 50%, and 99%), 50% SSR had the largest total social revenue, although the difference does not seem large. This outcome lends weak support to the notion that consumers prefer a balance between the museum and the charity. As charitable giving campaigns gain popularity, it is important to identify the most effective format for improving consumers’ attitudes and behaviors toward museums. Similar to De Vries and Duque (2018), the current study moved beyond assessing the impact on the charity to test whether consumers also value equity between the charity and the museum that collects donations on its behalf. We found a slight possibility for equity to be a contributing force in consumer evaluations of museums’ charitable donation campaigns, implying the effectiveness of charitable appeals that emphasize self-benefits and provide value to donors.
Fourth, donate-what-you-want produced a larger intention to visit than fixed-ratio SSRs, but it did not for chosen prices. This finding implies that with a larger degree of freedom, consumers’ intention to participate increased, but it did not affect the degree of willingness to pay. Donate-what-you-want had relatively larger chosen prices, next to the 50% charity. The larger values of intention to visit produced higher values of the expected total social revenue in donate-what-you-want than in fixed-ratio SSRs. This outcome suggests that when combining charitable giving with PWYW, allowing visitors to freely choose the charity ratio can be more effective in increasing the number of visitors, possibly producing socially desirable results. The average charity ratio suggested by the participants in donate-what-you-want case was 40.21%. This outcome implies that when respondents were given freedom, they did not prefer to lean either way between the museum and charity.
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