What if your favorite local restaurant, at the end of your meal, gave you a bill that let you fill in how much you should pay? In other words, what if you determined the price of your meal based on how much value you think you received?
I heard of a restaurant that did this and supposedly their revenue increased substantially.
This kind of pricing model works best in markets where repeat business is customary (hence your local cafe) so people don’t just leave $1, walk out, and never come back….Even though, nonetheless, I’ve been in plenty of restaurants just once and still tip a meaningful amount.
Are there other applications when customer-determined pricing could work? What are the pitfalls?