In contemporary business-to-business (B2B) markets, many firms have moved from selling individual products and services to selling value and improved customer outcomes (Terho et al., 2017; Keränen et al., 2021). When suppliers adopt these customer value-based business strategies, they often attempt to introduce value-based pricing schemes that tie their compensation to realized performance improvements in the customer’s processes (Bertini & Koenigsberg, 2020; Hinterhuber & Snelgrove, 2021). In the most advanced form of value-based pricing, the seller offers performance-based outcomes and is compensated through gain-sharing arrangements (Sharma & Iyer, 2011).

Under a gain-sharing arrangement, the seller promises to realize a measurable economic performance gain that is shared between the seller and customer in a predetermined manner (Thomson & Anderson, 2000; Sawhney, 2006). This arrangement benefits both parties by aligning their interests. As the selling firm has a direct stake in the customer’s improved performance, it has strong incentives to commit to performance optimization rather than, for example, selling more goods to the customer. Similarly, the customer pays only for realized performance. Thus, the gain-sharing arrangement can be seen as a genuine win-win scenario. However, despite the clear economic benefits that gain-sharing arrangements offer, anecdotal evidence suggests that, in practice, customers often resist these arrangements (Sawhney, 2006; Liinamaa et al., 2016). This is a key barrier for many sellers who want to implement and profit from customer value-based business strategies (Töytäri et al., 2015, 2017).

Traditionally, value-based pricing literature has considered gain-sharing arrangements primarily from an economic perspective that focuses on value and utility maximization (Hinterhuber, 2008; Terho et al., 2012; Töytäri et al., 2015). However, given that customers remain resistant to gain-sharing arrangements despite their clear and often substantial economic benefits (Sawhney, 2006), it is likely that this resistance stems at least partly from psychological and social elements that drive customers’ perceptions and decision-making. Such behavioral perspectives have received limited attention in prior value-based pricing research (Hinterhuber & Liozu, 2015; Kienzler, 2018).

To advance the theory and practice of value-based pricing, the purpose of this entry is to offer a more balanced perspective to understanding the sources of customer resistance to gain-sharing arrangements through the explication of both the economic and behavioral perspectives. The rest of this entry is organized as follows: first, we describe how gain-sharing arrangements are positioned in the current value-based pricing literature. We then outline how gain-sharing arrangements can be viewed from economic and behavioral perspectives and compare their key differences. Finally, we discuss implications for theory and practice.