A graduate of West Point and a veteran of the war in Iraq, one might not expect Tom Morkes to fear much. Nevertheless, he readily acknowledges his fear of writing for a public audience. Like many of us, Tom is uncomfortable with how publishing makes us vulnerable to criticism and rejection. That's one reason why he was open to the concept of "pay what you want" pricing. By putting the buyer in control, Tom lowers the barrier to building a direct – and profitable – relationship with the audience for his work.

In the United States, we've grown accustomed to the seller setting a fixed price for the goods or services they offer. As consumers, our choice is typically limited to deciding whether or not to pay the offered price. The system works – particularly for commodity products for which there are several competing suppliers.

However, fixed pricing doesn't work so well when the product is unique. Perceived value is personal and contextual. Set the price too high, and you'll fail to attract many buyers. Set the price too low, and you'll leave money on the table. What if you let the buyer set the price? Does she have an incentive to pay anything? A growing body of evidence suggests she will...in the right circumstances.

* Pay what you want pricing works best when there is a direct connection between the seller and buyer. That's a key advantage of a human scale business: we can connect one-to-one with other humans. In the process, we can build trust and a sense of mutual value and reciprocity.

* By asking customers to support our creativity, we give them the opportunity to be generous. Offering our generous support of the work of others' feels good. In part, that's because it makes us feel like true patrons. We're not only motivated by a sense of reciprocal obligation. Sometimes, we like to give extra to support a cause we believe is worthwhile. Our motivation is intrinsic.

* Pay what you want isn't just for beginners. When we are just starting a creative venture, the risk of mispricing our art, music, book, or other work is high. Consequently, the pay what you want mechanism is certainly appropriate for newbies. However, Tom makes the case that it can work for established authors and musicians, such as Radiohead.

* Your market may be broader than you think. If you are offering your product online, force yourself to think in terms of a global audience. As Tom puts its, a $10 ebook may not be out of reach for somebody in the U.S., but it may represent a significant investment for somebody in the Philippines, for example. Pay what you want pricing allows customers engage with you on their terms.

Of course, pay what you want doesn't work in all situations. If the marginal cost of your product is high, you'll need to set a minimum price, which is not unlike the reserve price for an auction item. Pay what you want is probably not the best approach for a commodity product offered by a faceless corporation. However, if you create differentiated products and cultivate a meaningful connection with your audience through consistent action, pay what you want pricing may yield a higher degree of profit than traditional, fixed pricing.