This paper investigates the viability of Pay-What-You-Want (PWYW) pricing when firms compete without restrictions of a minimum payment requirement. We show that the equilibrium outcomes are different when underpayers, consumers paying less than marginal cost, are present as opposed to when they...

Using a game theoretic framework, we show that not only can pay-what-you-want pricing generate positive profits, but it can also be more profitable than charging a fixed price to all consumers. Further, whenever it is more profitable, it is also Pareto-improving. We derive conditions in terms of...