"Are my Peers Watching me? Disentangling Audience and Interpersonal Closeness Effects in a Pay-What-You-Want Context"

Elisa Hofmann, Michael E. Fiagbenu, Asri Özgümüs, Amir M. Tahamtan and Tobias Regner

We disentangle by means of a laboratory experiment two relevant drivers of voluntary payments in Pay-What-You-Want settings: the effects of interpersonal closeness and an audience. Our 2×2 between-subjects design varies the interpersonal closeness of buyers and the observability of their payments by other buyers. This allows us to enrich the research on both drivers and identify whether the presence of close others (closeness effect), payment observability (audience effect), or the com- bination of both affects voluntary payments. We find that both effects separately are sufficient to increase voluntary payments. Payments are, on average, higher if they are observed by an audience and if buyers feel close to each other. While the effect of audience and interpersonal closeness on payments is additive in total, we do not find an interaction effect, if payments are observed by peers.

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