Examining the impact of external reference prices on seller price image dimensions and purchase intentions in pay what you want (PWYW)

Purpose Pay what you want (PWYW) is a participative pricing mechanism that permits customers complete freedom to choose prices. PWYW literature reports the influence of external reference price (ERP) on customers' price decisions and payments. The current research examines the influence of ERP presence, salience and understanding at the seller level by analysing customers' perceptions of seller price image dimensions and purchase intentions. Design/methodology/approach Study 1 tests the impact of ERP presence and salience in controlled lab settings while Study 2 takes this investigation further by including the moderating effect of ERP understanding on seller price image dimensions and purchase intentions in online settings. Findings Results illustrate the positive impact of ERP presence on all seller price image dimensions excluding the perceived price level. Perceived price fairness mediates the impact of ERP presence on perceived value. ERP salience positively impacts price processability. ERP presence and salience attached to it positively impact customers' purchase intentions through seller price image dimensions. Originality/value This is possibly the first paper to investigate the ERP effect on seller price image dimensions in a PWYW context that lacks fixed posted prices.