Signaling Virtue: Charitable Behaviors under Consumer Elective Pricing

People want to be seen as kind, fair, and generous, and that goal influences their decision-making. Pay-what-you-want pricing highlights those goals by allowing consumers’ to express their social preferences in a diagnostic transaction environment. This paper investigates how the opportunity to signal social identity influences consumer behavior under pay-what-you-want pricing. In a large field experiment, Gneezy et al. (2012) found that when people pay-what-they-want and a portion of their payment goes to charity, they are less likely to buy, but pay substantially more when they do. The authors attribute this behavior largely to people’s identity and self-image concerns. People want to pay a low price, but when a purchase looks like charitable giving, they also want to avoid looking greedy, either by paying a generous amount or simply not purchasing. These behaviors highlight two related questions. First, how important are the relative concerns for self-signaling and social signaling? Second, the logic above contrasts a quantitative concern (finding the right low price) with a qualitative one (feeling like a nice person). If that is correct, then we might expect to see high sensitivity to charitable giving, but low sensitivity to the extent of that giving. In four field experiments we manipulating the presence and magnitude of charitable signals to understand how these forces operate.