This is a guest post from former GRS staff writer Donna Freedman.

Looking for a cheap date, some budget-friendly culture, or ways to make your next vacation more affordable? Four words: “Pay what you want,” or PWYW.

Theaters, museums, comedy troupes and other organizations may offer PWYW days or nights, where you hand over only as much as you can afford. Think of it as happy hour for entertainment — a way to get out of the house without your budget going off the rails.

How far does it go?

The lively arts aren’t the only PWYW option out there.

The past few years have seen food, ride-sharing, music/gaming/comedy/book downloads, an investing service and apps (even one for payday loans) offered at shopper-led pricing.

The benefit to consumers is clear: Rather than pay a set price, you set your own. Vendors may earn less but make up for it in volume — or not. (More on this later.)

Digital products in particular lend themselves to the pay-what-you-will model because, once created, they’re cheaply duplicated. Restaurants (which operate on slim profit margins already) and other physical spaces have a different set of challenges.

Good for us, but not for them?

However, it’s got to be tough to keep a theater running if a bunch of cheap so-and-sos pay a dollar each, right?

Well, yes and no. Part of an arts group’s mission may be to bring culture to everyone. Besides, people who get in the habit of attending museums and shows when they are broke might become subscribers or even patrons later on. Bonus: Those PWYW nights are also great publicity through word of mouth or social media buzz.

Back in 2000, horror author Stephen King published “The Plant” in installments on his website, saying he’d keep writing as long as 75 percent of the readers kicked in at least $1 each. After six installments, he quit — but by then he had earned almost half a million bucks.

E-commerce was not as well established back then. Imagine what he’d make today with that business model.

Yet, while online sales are much more common these days, so is the availability of free stuff. Entrepreneurs face long odds getting people to part with their bucks. Why spend money on music/apps/whatever when you can get them for nothing?

Proponents of PWYW say that musician Amanda Palmer is a great example of bucking the system. But according to DigitalTrends.com, just over half her listeners actually pay. If a fairly well-known performer gets only about a 50 percent buy-in, imagine what new artists and designers get.

Again, it’s great for the consumer who can get all sorts of stuff for free or nearly so; it’s not as great for the creators, though.

“Letting people value the product”

Tom Morkes, author of “The Complete Guide to Pay What You Want Pricing,” talked with a spokesman for the Gumroad direct-sales platform. “Vendors who switch to PWYW often get average payments that are higher than the initial price of the item,” the official said. In fact, one $3 book sold for an average of $5 when the author chose a “$1+” tag.

Why? “… because you’re letting people value the product for themselves.”

In theory, and in the real world

In a perfect world, PWYW is mutually beneficial. Folks on tight budgets can still listen to music, have a hot meal, or take their kids to a museum. When times are better, they can (theoretically) contribute more. In the meantime, artists and entrepreneurs are making some sales and getting their brands out in front of people.

That’s a nice theory. But it is safe to assume that some opportunists will, with zero shame, plunk down a quarter to see a show even if they can afford more.

Under the right conditions, some consumers will pay more than asked. A study led by Ayelet Gneezy of the University of California, San Diego, noted that people tend to be more generous if payments help others in some way.

Panera Bread operates PWYW “Panera Cares” cafes in Boston, Massachusetts; Portland, Oregon; Dearborn, Michigan; and Clayton, Missouri. Donations cover about 75 percent of the meals’ costs; the company estimates that as many as one in five people pay nothing.

A nonprofit called “One World Everybody Eats” maintains a list of PWYW “community cafes” across the United States. Those in a better place financially can pay more than the suggested donation to help subsidize the rest.

Boosting the budget, or busting it?

Maybe PWYW is the right tool to stretch your limited finances. Keep an eye on the bottom line, however. Although it sounds counter-intuitive, consumer-led pricing can bust your budget and/or crowd your life.

For example, Humble Bundle sells groups of games, graphic novels and other digital products using the PWYW model, with a twist: Consumers choose what percentage of the payment goes to the creators, to charity, and to website operating costs.

Sounds great, right? You get stuff at outrageously low prices and charities benefit.

Trigger warning: I’m about to sound like your mother. If you don’t need it, it’s no bargain. How many games or other products can you realistically use? Even digital products can become invisible clutter. There really is such a thing as too many choices.

Mindful generosity

Remember the other guy’s bottom line too. Just because you can pay a penny for that song or show doesn’t mean you should. Actors, developers, musicians, improv artists and museums have to keep the lights on too. Information may want to be free, but people need to be paid.

Readers: Have you ever participated in a PWYW exchange? How did you decide what to pay?

(Former GRS staff writer Donna Freedman is on staff at Money Talks News and writes for a number of other websites and magazines. She blogs about money and midlife at DonnaFreedman.com and about writing at WriteABlogPeopleWillRead.com.)

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