"Privacy Is Precious: On the Attempt of Lifting Anonymity on the Internet to Increase Revenue"

Tobias Regner and Gerhard Riener

The emergence of Pay-What-You-Want (PWYW) business models as a successful alternative to conventional uniform pricing brings up new questions related to the task of pricing. We investigate the effect of a reduction of anonymity on consumers' purchase decisions (whether to buy, and if so how much to pay) in a natural experiment at an online music store with PWYW-like pricing. We find that revealing the name of the customer led to insignificantly higher payments, while it drastically reduced the number of customers purchasing. Overall, the regime led to a revenue loss of 25%. These results suggest that the positive effect of reduced anonymity, previously established for donation or public goods contexts, does not extend to a consumption environment. Instead, the substantial opt-out of customers is likely to be motivated by concerns about privacy.

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