

Freakonomics: More on "Paying what you wish" as Pricing Strategy - cwan
http://freakonomics.blogs.nytimes.com/2009/10/05/more-news-on-the-pay-what-you-wish-front/

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kakooljay
"Under certain conditions... Pay What You Like pricing could be more
profitable than uniform pricing..."

Pay What You Like pricing might even allow firms to approach a theoretical
maximum (for profits). To maximize profits, a firm must employ what economists
call price discrimination
[<http://en.wikipedia.org/wiki/Price_discrimination>]: charging EACH customer
the maximum that he/she would be willing to pay.

Open-air PWYC theatre (like of Shakespeare in the Park) is a good example.
Marginal costs are low: the cost of seating an extra customer is close to zero
so it doesn't really matter if some customers only pay $1. Spirits are high
(theatre-goers are generally in a good mood) so customers are inclined to be
generous. Even frugal customers will probably pay a fair price (thanks to peer
pressure & the fear of public embarrassment).

I just wonder how PWYC pricing would have worked at Woodstock...

