Pay What You Want: An Exploratory Study of Social Exchange and Buyer-Determined Prices of iProducts

Abstract

The online marketplace has provided sellers an arena for marketing digital products and radically changing traditional distribution processes. Online sellers have also experimented with buyer-determined pricing schemes, such as the “Pay What You Want” model that is the focus of this study. Under this pricing scheme, buyers are allowed absolute control over the price of the transaction, including the amount of zero if desired. Using Social Exchange Theory as a guide, we explored the possibility that a buyer’s price he or she is willing to pay and the price actually paid for a digital product on the iTunes marketplace can differ based on social and economic factors associated with the transaction. While this study offers an exploratory look into the PWYW model in an online setting, the results provide insight for product developers and marketers considering this pricing scheme.

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