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A recent business trend is participative pricing , which allows customers to participate in setting the price of goods and services. One form of participative
- A recent business trend is participative pricing, which allows customers to participate in setting the price of goods and services. One form of participative pricing is pay-what-you-want (PWYW) which allows a customer to pay whatever they want, including $0. In one relatively well-known example, the band Radiohead sold its In Rainbows album on the bands website, and allowed fans (customers) to pay as much (or as little) as they wished.
- Suppose you worked for the band, and wanted to figure out how many units of the album needed to be sold in order for the band to break even. How would the pay-what-you-want pricing strategy complicate the break-even analysis?
- Another form of participative pricing is name-your-own-price (NYOP), made popular by Priceline. With NYOP, sellers can set a minimum price, below which they will not sell their good or service. Typically, sellers set a minimum price that is greater than $0. (Note that if seller sets the minimum price at $0, then NYOP is the exact same as PWYW.) Suppose Radiohead used NYOP instead of PWYW for its In Rainbows album. Would this change your answer to part a? If so, how?
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