Wouldn't It Be Nice to Really Pay What You Wish?

It is worth noting that several pricing schemes that often get lumped together are in fact quite different.

“If set up properly, PWYW can make it hard for all but the most callous customer to rip you off.”

There’s the honor-box system with a posted price list, like the one the Bagel Man used. In this scenario, there’s no one to collect the money but the price is essentially fixed, and the seller (the Bagel Man, or whomever) engages in a tradeoff: lower labor costs but higher risk of underpayment.

There’s the “freemium” model, with several iterations, in which someone offers a product or service or some portion thereof for free while finding an alternate means to monetize the enterprise. This is what Chris Anderson has written about.

And then there’s the sexiest, riskiest, funnest model: pay-what-you-wish. Think Radiohead. If you use a PWYW scheme too liberally, you are courting financial disaster. Just imagine if Tiffany & Co. held a PWYW day on all diamond jewelry. Personally, I love it when a salesman or contractor asks me “What do you want to pay?” for a certain good or service. My answer is always the same: “What I want to pay is zero. Does that work for you?”

So plainly there are limits to the viability of PWYW. But one factor that PWYW pricing calls into play is human conscience: if set up properly, PWYW can make it hard for all but the most callous customer to rip you off. Consider this story sent along by a reader named Jessica Donovan, about a nice-sounding guy in Essex, Vermont, who started a PWYW taxi service:

As an antidote to rigid financial conditions, Hagen got his cab driver’s license and insurance and officially opened for business last month with the Recession Ride Taxi. In his SUV, Hagen will take passengers anywhere they want to go in and around Essex — for whatever they want to pay.

There are no set prices for transportation, and Hagen also offers a cooler full of pay-what-you-want beverages to thirsty guests. He even offers special perks to frequent riders: he provides his passengers with hole punch cards, giving them a free ride after every six trips.

Of course, Hagen’s customers could easily get a free ride anyway; after all, he’s not forcing them to open their wallets. Since his payment policy is so flexible, he’s taken some strange trades: one customer gave him a $10 grocery card, and a local musician gave him his group’s CD. But in the weeks since the business has launched, Hagen hasn’t been short-changed once.

“I believed from the start that this would work,” he said. “I believed that people are going to be generous enough to make it worth my while, and I’m going to be generous enough to let them decide.”

I think most of us would have a hard time stiffing the taxi driver in a case like this. I wouldn’t even be surprised if his PWYW scheme generates so much goodwill that he makes more money than if he had a fixed price. When you match PWYW with a face-to-face, conscience-inducing contact, it’s not very risky. What I would like to know is what is the riskiest, easiest-to-rip-off PWYW scheme you’ve heard of, and how did it work out?


I got married in my old College's chapel. The Dean said there was no charge for using the chapel for weddings, but it was customary to make a donation. So I did, but I had (and still have) absolutely no idea what sort of amount would be expected. It really was "pay what you wish", not "pay what you wish relative to a known established price".


I have a friend with a farm in western Illinois, where I sometimes visit. Many of the locals who grow edible crops, or who have very large gardens, leave asparagus, or beans, or whatever, with a paybox. And it works great. I've never heard of anyone feeling people are taking without paying. I think in this case it works for a similar reason to being in the presence of the cab driver. It works in very local economies where people see individuals associated with the potential rip-off, rather than a big company--even if they're not face to face. Good argument for buying and selling locally :)


I'd be curious to know what would happen to his income if he had an indicator of some sort as to how much the trip was costing him: would it increase payments or decrease it to be just at or above his costs.


The pay what you want method seems to work when the ones paying already have an idea what the value of the goods or service are worth in an established market.


Essex, Vermont is not the largest city (18,000 people) and judging by the picture in the add, you call his cell phone to get service - you wouldn't normally hail the cab from the side of the street - so Hagen knows who he is picking up, he may recognize or save the phone number. So if someone pays very little or not at all, they will be remembered and are at a disadvantage in the future as Hagen may not pick them up - or may put them behind picking up a well paying (or even new) customer.


Downlifting - i think that's what it's called on this blog. any media files that you get for free can later be purchased either in original form or in kind.


In Santa Monica, there are several (power) yoga studios that are donation based. And they keep opening new ones. The way it works is that you take a class and, at the end, you put whatever you want to pay in a box at the door. The suggested donation is $14.
I see it as a clever way to price discriminate: the marginal cost of a student in the class is close to zero (so you don't want to exclude people that are only willing to pay, say $7) and people are so exhausted (and in peace) at the end of the class that I guess few of them try to save a few bucks...


What mitigates the risk is the existence of a relationship. Friends don't rip friends off.

You don't successfully run such a service unless people like you. Few people like "the system".


M.F. sez: "So if someone pays very little or not at all, they will be remembered and are at a disadvantage in the future as Hagen may not pick them up - or may put them behind picking up a well paying (or even new) customer."

--Good point. Like tipping: when the waiter sees you again, you will get the service you have already paid for! Or for quicker service at a crowded bar, tip early - an advantage to paying up-front versus paying by 'tab' at the end of the nite!


We started using PWYW a couple of years ago for LibraryThing.com. We immediately started making more money (although only slightly $25.50 compared to $20 recommended price) than we did when we had a set lifetime membership price. One thing to note is that we have two price options: yearly and lifetime. The lifetime returns, as stated above, are slightly higher while people paying for yearly memberships actually pay slightly less than the recommended $10.


@1 - in England, the Church of England / Anglican churches have a set fee for use of their churches for a wedding (about £300).

The Roman Catholic churches ask for a donation, without specifying what that amount should be. A quick google suggests that most people donate £100 - £150.


I know a good many fiction writers who, when they hit financial trouble, will offer work on the internet on the PWYW system. I'm sure most people download the stories for free, but enough pay that it seems to work to help authors over the hump.

I think that situation is actually working like modified alms-seeking. The writer is reaching out to the community of fellow writers and readers for a temporary spot of help. To demonstrate their goodwill, that they aren't just freeloading, they produce work. Their fellow writers know very well just how much work is involved. This is not slack-offery.

Most writers and artists have been just a few dollars away from similar straits in their past. The real motive may be community-building and collective support. As long as the requests are (a) infrequent in the community overall, (b) not chronic from the same person, and (c) based on genuine hard times (e.g. hospital bills, lost day-jobs, house burns down), the community pulls together and those in fortunate circumstances help the others.



Freeware. I can't recall the exact percentage, but it's something like less than one percent of people who use it actually make a contribution to the developers.

I had a customer once who could be a real jerk and I knew going in to a negotiation with him that he was going to beat on me and threaten me with going to my competition, even though he had never had even one service call in the previous 5 years. So, when we came to the discussion about price, I told him to name his price and that so long as it was a price I could hit, I would honor it. Of course, he laughed and said that he didn't want to pay anything. I did not reply, simply took out my pen and got ready to write his price down. We went back and forth, him demanding a price from me and me insisting that it was his price to name. At one point, he got really agitated. I told him he was in a no-lose situation, that he had already agreed that the system he had settled on was ideal for his needs and that I had given him the opportunity to do the same with his price. After two weeks of making noise, he signed with me for about the same amount he had been paying. And was happy about it.


Andy Gallagher

As a musician, this is exactly what I'm trying - bandcamp.com now offers a magnificent PWYW scheme, and we do most of our album sales through this option - and we do get a wide range of price points.

The crux of this question when directed towards the musician is that the current options available (almost non-existent recording costs [laptop], essentially free and unlimited digital distribution) have never existed before, and entirely new business models have to be created to sustain a musician. And using this here internet, we're really just trying to solve this problem through an open-source solution (we publicly plot the finances of what it's like to be in a band in modern times). So hopefully soon we'll arrive at a price point (or a range) that works for what to "sell" at shows to keep us fed and traveling city to city. I'll let you guys know if any of it works. (trainsacrossthesea.com)



Other option: a variable price but with a "default": "It's customary to pay/donate $n for this service." The customer could then pay less (or more) but will be "directed" to the default price. It's like when Colorado Public Radio contacts me - I'm currently a donor but they always ask for more. I can decline, of course....


We shouldn't underestimate the importance of the social element. The presence of the cab driver is one thing, but I imagine that the success of this sort of enterprise hinges in large part on his personality, charisma and charm. There's more of an opportunity to "win over" the customer here than in, say, the lockbox scenario--more of an opportunity for salesmanship--and I think that his abilities in this area will strongly impact his bottom line.

George E.

Tips for waiting staff are and have always been PWYW. Yes, there's an "accepted" percentage and PWYW doesn't apply to parties over 6, but you don't have to pay waitresses anything if you don't want to. This even works without an established friendship relation, i.e. when you're on the road, never to visit that bar ever again.

And to agree with another commenter, yes, PWYW works better if you have an expected "MSRP".


The Metropolitan Museum of Art in NYC does not have fixed prices, but rather suggested donations and seems to operate. Granted, it may receive funding from sources outside of visitors, but still...

Rich Wilson

I pulled a pedicab for a while, and we weren't allowed to set or even suggest a price. It was donation only. The 'trick' was to act like it was a lot of work and go for sympathy pay. I could never get the hang of the act, so I didn't make as much as most other people. The big tippers were tourists and drunk guys trying to impress a woman.


There's a diner in Denver called SAME (So All May Eat). There are no prices or cash registers - only a donation box. Patrons are encouraged to give what they wish. If someone doesn't have anything for a meal, they're encouraged to volunteer for an hour. They've been at it for three or four years now - so there's evidence that it's working.