Profitability of two-part tariffs in name-your-own-price markets

Stich, Lucas ; Zeithammer, Robert; Spann, Martin und Häubl, Gerald (2026): Profitability of two-part tariffs in name-your-own-price markets. In: Journal of Retailing [Forthcoming]

Abstract

Name-Your-Own-Price (NYOP) mechanisms offer retailers a participatory alternative to posted pricing by allowing consumers to bid on goods and services. We examine when and why charging a non-refundable bidding fee to submit a bid—a “two-part NYOP” mechanism—can improve retailer profitability. Across two incentive-compatible laboratory experiments and one field experiment, we assess the relative profitability of this mechanism compared with simple NYOP with zero bidding fee and document behavioral factors that moderate the relative profitability. We find that modest bidding fees can increase a NYOP seller’s profits; however, the extent to which they do so is moderated by 1) consumers’ experience with the mechanism and 2) the use of a decision aid that helps consumers with calculations. Both moderators reduce buyer participation to the point that a NYOP seller may no longer benefit from charging bidding fees. Thus, NYOP retailers may find bidding fees most effective as short-term promotions or membership benefits rather than permanent pricing strategies. Our field experiment corroborates that small, reasonable fees can raise profits in short-term sales campaigns, consistent with the laboratory evidence. Regarding the underlying consumer behavior, quantitative predictions of the existing risk-neutral theory do not align well with the observed behavior, even among experienced consumers. Risk-averse expected utility theory does not fit well either, because consumers exhibit a robust preference inconsistency previously documented in the literature.

• Dokumententyp: Zeitschriftenartikel
• Keywords: Pricing; Auctions; Behavioral economics; Name-your-own-price (NYOP); Experiments; Retail promotions
• Fakultät: Betriebswirtschaft > Institut für Electronic Commerce und Digitale Märkte
• Themengebiete: 300 Sozialwissenschaften > 330 Wirtschaft
• JEL Classification: D01, D12, D44, C91, L11, L81
• ISSN: 0022-4359
• Sprache: Englisch