Chicago 2015

1. Leading by example
Evidence from Pay-What-You-Want
Michał (with Anna Kukla-Gryz
Krawczyk and Joanna Tyrowicz)

2. Swallows that used to eat after 6 PM
Leading by example
Evidence from Pay-What-You-Want

3. PWYW
• Extreme example of a participative
pricing procedure
• In theory, consumers should pay 0 (or
epsilon if 0 not allowed)
• They may care, though, about
– the seller, esp. if he offers good stuff
– existence of seller’s business
– compliance with the social norm
– self-image…

4. PWYW: some empirical evidence
• Kim et al. (2009) provide several
examples
• Riener and Traxler (2012) study the case
of a Pakistani restaurant in Vienna
– dynamics over 2y: price decline somewhat,
then stabilize
• Schons (2014) also observe a decline in
their three-week experiment

5. Our focus now:
leading by example

6. Impact of past contributions
• Not much known about PWYW
• Seems to matter in charitable
contributions:
– Fundraisers often update donors on progress
– Believe it is important to secure support of
rich givers in a ``silent phase’’
• Some field experiments seem to support
this

7. Martin and Randal (2008)
• Largest number of contributions in the 50c
treatment
• Highest contributions in the 50$ treatment
• Lowest and and least frequent in the empty
treatment

8. Impact of past contributions
• List and Lucking-Reiley (2002): large
effect of seed money on number and
level of donations
• Landry et al. (2006): no effect of seed
money
• Soetevent (2005): some difference
between amount collected in open vs.
closed baskets in a church

9. Some theoretical reasons
why it could matter
• Non-constant return on donations – my
giving may have a larger expected impact
once a lot has already been collected
(Andreoni, 1998)
• Conditional cooperation – I only want to
give if others give (Karlan and List, 2007)
• Leader’s (superior) information (on quality)
(Hermalin, 1998; Vesterlund, 2003)
– mixed experimental evidence (Meidinger and
Villeval, 2002 vs. Potters et al., 2007)

10. Our project
What is Book Rage?
• Modeled after the succesful Humble Bundle
• Sells bundles of books using PWYW
• But offering some incentives to give more:
1) Exceed the mean to get a bonus.
2) Exceed a fixed contribution level to get a
bonus
3) A bonus if enough bundles bought
• Contributors can decide how to split the money

11. Let’s use the time machine…
http://web.archive.org/web/201503291033
27/http://bookrage.org/

12. 12

13. 13

14. Amounts involved
Data from:
• 19 BookRage bundles (one not finished)
• 4 QuickRage bundles
• 1 AudiobookRage bundle
0
5
10
15
20
25
30
35
40
45
0
1000
2000
3000
4000
5000
6000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
Number of sold bundles Average payment

15. Typical dynamics
0
50
100150
0
50
100150
0 500 0 500 0 500
1 2 3
4 6 8
amount mean amount
time_since_start
Graphs by Bundle

16. Bonus for exceeding the mean matters
01234
Density
0 1 2 3
relative_amount

17. Bonus for exceeding 25 PLN
also seems to matter
0
.1.2.3
0 50 0 50
0 1
Density
amount
Graphs by Number of books above a fixed threshold

18. 18
Clients per minute:
Poisson regression
Negative impact of mean
No impact of leaders

19. 19
Amount:
quantile reg.
Positive impact
of mean
No impact
of leaders

20. Thank you for your attention!
Author: MK
e-mail: mkrawczyk@wne.uw.edu.pl
More about our research on
http://grape.uw.edu.pl
Twitter: @GrapeUW