Do long-life customers pay more in pay-what-you-want pricing? Evidence from live streaming

Pay-what-you-want (PWYW) pricing is a participative pricing strategy that has emerged in many industries. A prominent example is the voluntary gift-sending in live streaming. Prior research has examined factors driving viewers’ gifting decisions in a live streaming session. In this paper, we focus on the dynamics of payment behavior over time under PWYW. Based on individual-level observations of more than 60,000 viewers over a period of 165 days since their registration on a live streaming platform, we find a declining pattern in PWYW amount with the increase in individual tenure. We then propose and test several potential explanations, including variety seeking, alternative ways to interact, and substitution effect. The empirical results are consistent with the substitution effect that the cumulative spending in the past could crowd out the current PWYW amount, because viewers may believe that they have already contributed a significant amount. We further investigate several moderating factors for the overall negative effect of past spending. Besides contributing to the PWYW literature, our research would help firms understand the dynamics of individual PWYW behavior and design mechanisms to incentivize long-life customers to pay.