Marketing Department's Lecture

Theme：Highest Contributions from Others: A Dampening Effect on PWYW Payment

Speaker：MA Xuejing(School of Management, Peking University)

Time：2019-01-10 14:00

Address：Room 1008, Mingde Business Building

ABSTRACT:
Traditionally implemented within private contexts, Pay-What-You-Want (PWYW) pricing has emerged in online social contexts in which individuals’ payment behavior can be observed publicly. In this paper, we analyze how others influence individuals’ payment behavior under PWYW pricing. Specifically, we focus on the effect of the highest contribution from others and examine three potential explanations: anchoring, signaling, and crowd-out. We develop a set of theoretical predictions on individual payment incidence and payment amount based on each explanation. We then conduct an empirical analysis using a large-scale, individual-level data set with 2.7 million observations from a live streaming platform with PWYW pricing. We uncover a robust, yet striking finding: namely, the highest payment from others has a negative effect on both individual payment incidence and payment amount, suggesting that the crowd-out effect is the primary driving force. Furthermore, we find that the crowd-out effect is attenuated by individuals’ experience with live streaming and gift payments on the platform. Our findings have important managerial implications for firms that adopt PWYW pricing in a social context. While highlighting large payments from others is commonly used by live streaming platforms to induce more and higher payments, it can actually do the opposite by hurting the revenue of the platform, since information of the highest payment from others reduces individuals’ payment incentives by lowering their payment likelihood and amount.

BIO：
Xuejing Ma is a Ph.D candidate in Marketing at Guanghua School of Management, Peking University. She is a quantitative marketing researher and her research interests include social media, incentives and motivations, and emerging markets. Prior to joining Peking University, Xuejing received her B.A. degree in Management and B.S degree in Computure Science from Renmin University of China.