When Given the Option, People Aren't Cheapskates

People want to do the right thing, paying more when given the option of getting something quite cheaply, a behavioral study indicates.

This bit of good news about humanity comes from an international team of researchers who tested how people responded to "pay what you want" scenarios. It turns out, people act in ways that allow them to keep a good image of themselves, the team concluded.

Social norms about prices are key to what people think of as a fair price — think of the expectation of tipping 15 to 20 percent in the United States, they say. If someone can't or doesn't want to pay the "appropriate" price, then that person may not buy at all. What's more, they found that when eating at a "pay what you want" restaurant, people tended to spend more when paying anonymously than when others could see what they were paying. That's because the psychological effect of being monitored may crowd out the self-image boost, because the person believes he or she "had to" pay the fair price, the researchers speculate.

In the first of three scenarios, visitors to an amusement park were given the option of paying what they wanted to buy a photo taken of them during a ride. Half of the revenue, some were told, was donated to a charity for ill children. When told about the charity, riders became less likely to buy the photos. However, those riders that did buy paid on average five times more for the photo than riders not told of the charity.

"When someone is willing to pay little but cares about maintaining a positive self-image, the best option is not to buy at all," the researchers, led by Ayelet Gneezy of the Rady School of Management at the University of California, San Diego, wrote.

This result was reinforced in the second scenario, when passengers returning from a boat tour were given the chance to buy a photo taken of them for $5, $15, or whatever amount they wanted, depending on the tour. Not surprisingly, sales went up for the $5 photo versus the $15 photo. But they dropped when passengers could pay whatever they wanted.

"When the company sets the price at $5, there is no ambiguity about fairness, self-image concerns disappear, and people are happy to pay," the researchers wrote.

And finally, at a buffet restaurant in Vienna, Austria, where diners have the option of paying what they feel is appropriate for a meal, the team tested if people acted differently when others could see how much they paid. They found that diners tended to pay more when asked to submit their payment in an envelope (the anonymous group) versus giving it directly to a cashier.

"We can clearly reject the hypothesis that customers pay less when they are not observed. This result supports our proposition that people often pay to enhance their self-image," the researchers write in a study published on Monday (April 23) in the early edition of the journal Proceedings of the National Academy of Sciences.

An analysis of questionnaires given to diners showed a strong relationship between what people believed the owner expected them to pay and actual payments, suggesting that customers are trying to pay a price that feels fair, they write.

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