We explore the potential benefits of an up-and-coming business model called “pay-what-you-
want” in an environment where consumers experience a warm glow by patronizing a
particular firm. We show that, given a social norm regarding minimum contributions, a pay-
what-you-want firm should announce a minimum suggested contribution, which is positive—
but smaller than the profit-maximizing single price—so as to benefit from “endogenous price
discrimination,” whereby consumers differentially contribute more than the suggested …