The strength of ‟anchoring effect” on Pay What You Want payments:

Evidence from Vignette experiment.

Anna Kukla-Gryz and Katarzyna Zagórska

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Examples of the implementation of PWYW

https://storybundle.com/writing- Openbooks.com

- Humblebundle.com

- tommorkes.com

- paywhatyouwant.eu

- storybundle.com

- ………

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Hypothesis

H1: With a voluntary PWYW payments, with a given expected quality of the good,

consumers provided with external reference prices pay less than consumers who do not have this

information.

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Hypothesis cont.

H2: The PWYW payments increase with consumers perception of higher costs of production as the share of the products

price. 

H2a: The PWYW payments increase with consumers perception of the higher authors reward as the share of the

products price.

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Hypothesis cont.

H3: Experience character of the goods affect significantly the difference between

the willingness to pay before and after consumption.

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Research description and methodology

Subjects:

343 clients of one of the largest eBook retailers in Poland fantasy and crime fiction readers.

Rspondents’ socio-economic characteristics were close to a national readers’ profile.

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Vignette experiment, treatments (scenarios)

Different reference price (low/medium/high/no external reference price) for different perceived product quality (low/medium/high): 4×3=12 combinations.

Patricia is planning to purchase an eBook in the „Pay What You Want” system. In traditional bookstores, the book costs 2.35 €/ 7,70 € / 9,50 € / no reference price. Patricia read many reviews about the eBook and is convinced she will enjoy it. / she has mixed feelings about whether she will enjoy it. / is worried she will not enjoy it.

How much does she pay?

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Results: Hypothesis 1Average estimated PWYW payments for eBook with perceived low, medium an high quality. Estimations given in Euro for different values of reference prices and without the reference price (Control).  Low quality Medium quality High quality VARIABLES Contr. 2.35€ 7.70€ 9.50€ Contr. 2.35€ 7.70€ 9.50€ Contr. 2.35€ 7.70€ 9.50€                         Min 0 0 0 0 0 0 0 1.90 1 0.24 1.19 3.57                         Max 36.7 2.30 4.76 6.90 36.7 3.57 4.76 7.14 50 4.76 5.95 9.5                         Mean 2.14 0.98 2.02 2.69 3.37 1.54 2.94 4.19 5.05 2.16 4.12 6.09                         Standard Dev. 1.44 0.75 1.08 1.40 1.43 0.65 0.84 1.20 2.0 0.65 0.79 3.57                         Observations 79 78 78 85 79 78 78 85 79 78 78 85

Significance level: p<0.01

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Additional survey questions

What percent of the eBook price do you think is the cost of publication?Please give an answer between 0 and 100.What percent of the eBook price do you think is goes to the author?

Are you, in general, a person willing and ready to take on risks or are you more risk-averse?

How much do you most often pay for a single eBook?

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Results: Hypothesis 2 and 2a Dependent variable: estimated PWYW payments. Separate regressions for eBook with perceived low, medium an high quality and for different values of reference prices and without the reference price (Control).

  Low quality Medium quality High quality   Control 2.35€ 7.70€ 9.50€ Control 2.35€ 7.70€ 9.50€ Control 2.35€ 7.70€ 9.50€                         Publicationcosts 0.103*** 0.036* 0.009 0.019 0.112*** 0.015 0.021 0.001 0.116** -0.002 0.039* 0.038

Authorreward 0.081*** 0.033* -0.018 0.052 0.101*** 0.010 0.017 0.046 0.096** -0.012 0.013 0.089**

Risk Loving 0.921*** 0.174 -0.086 0.096 0.709*** 0.201 0.273 0.441* 1.071*** 0.190 0.315* 0.257

Av. Book Price 1.435* 0.246 -0.263 1.928** 2.654*** 0.163 -0.103 1.030 3.631*** 0.193 -0.367 1.072

Book_Exp YesAge YesSex YesInd_Exp YesConstant YesObservations 79 78 77 84 79 78 77 84 79 78 77 84

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Additional survey questions

What was the highest price you would have been willing to pay for the last purchased and read eBook at the time of the purchase?

If you could have paid for the last purchased and read eBook a price adequate to its value after reading it, what would the maximum price you would be willing to pay be?

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Results: Hypothesis 3Effect of experience character of the eBook on the difference in the willingness to pay before and after reading it.

Book Exp: difference betweenconsumers content rating afterreading the book and herexpectations before reading it. before reading itInd Exp: the difference in the ability to assess the value of aneBook and eBook reader.

  WTP ex post - WTP ex ante

   Book Exp 0.044*** Ind Exp -0.016** Read more 0.054 Sex -0.021 Age -0.004** Constant 1.113*** Observations 317

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Conclusions1) In case of the cultural goods offered digitally, PWYW

schemes can be successful but with products of low and medium value when no reference price is provided.

2) With no reference price, consumer’s voluntary payments depend on different individual’s factors such as: the perceived percentage of the price believed to be paid to the author and to cover the publication costs, an individual’s higher propensity to take a risk and average price usually paid for the good.

3) Experience character of the good (underestimation or overestimation of the quality of the good) significantly affect the difference between the willingness to pay ex post and ex ante consumption.

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Conclusions cont.The results suggest, that:

1) If the reference price is not provided, voluntary payments might be enhanced by informing the consumers about the costs needed to produce the good. In case of cultural goods, some reminder about the need to reward authors work might increase the payments.

2) In PWYW campaigns adapted for experience goods (cultural goods) payments after instead of before the consumption should be considered.

Thank you for your attention!

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