Pay-what-you-want or mark-off-your-own-price – A framing effect in customer-selected pricing

• Natural field experiment comparing customer-selected rebate pricing mechanisms.
• First to compare pay-what-you-want (PWYW) to mark-off-your-own-price (MOYOP).
• Prices are significantly lower in MOYOP than in PWYW.
• Pricing mechanism affects customers’ willingness to pay.
• Results are in line with a shift in norms based on perception of appropriate prices.

We conduct a natural field experiment to test for the effect of framing on prices paid in two customer-selected price mechanisms. In two framing conditions, we sell a soft drink and provide customers with a reference price for this drink. In the pay-what-you-want (PWYW) condition, customers are told that they can pay much as they want. In the mark-off-your-own-price (MOYOP) condition, customers are told that they can reduce the price by as much as they want. We find that prices are significantly lower and that more customers choose a price of zero in the MOYOP compared to the PWYW condition. We conjecture that the explicit request to reduce the price in MOYOP is a strong signal for customers to adjust their perception of the appropriate price downwards.