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Good News, Bad News, and Social Image: The Market for Charitable Giving

Author

Listed:
  • Luigi Butera

    (The University of Chicago)

  • Jeffrey Horn

    (General Assembly)

Abstract

We conduct a laboratory experiment with real donations to test how unexpected information about charities’ qualities and its public visibility affect giving. A perceived increase in charities’ qualities represents a decrease in the price of charitable output, and can generate both an income and substitution effect on nominal giving. On the one hand positive news about charities’ qualities can increase giving, since donors realize that it is cheaper to generate charitable output. On the other hand positive news may crowd-out giving because donors may provide a higher or equal level of charitable output with lower nominal donations. Similarly, if information about quality has a social signaling value, then donors who give to acquire social recognition may perceive quality and quantity of giving as either complements or substitutes in generating social image returns. We find that when information about charities’ qualities is privately received, giving is always increasing in the quality of the news, and bad news has little effect on giving. Differently, when information is public, we find that 34% of donors trade-off the quality and quantity of their gifts. We show that these donors are relatively more motivated by social recognition, and argue that image conscience donors strategically use positive information to reduce giving. Length: 35

Suggested Citation

  • Luigi Butera & Jeffrey Horn, 2013. "Good News, Bad News, and Social Image: The Market for Charitable Giving," Working Papers 1041, George Mason University, Interdisciplinary Center for Economic Science, revised Mar 2016.
    • Handle: RePEc:gms:wpaper:1041
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    References listed on IDEAS

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    Cited by:

    1. Nadine Chlaß & Lata Gangadharan & Kristy Jones, 2023. "Charitable giving and intermediation: a principal agent problem with hidden prices," Oxford Economic Papers, Oxford University Press, vol. 75(4), pages 941-961.
    2. Brown, Alexander L. & Meer, Jonathan & Williams, J. Forrest, 2017. "Social distance and quality ratings in charity choice," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 66(C), pages 9-15.
    3. Adena, Maja & Alizade, Jeyhun & Bohner, Frauke & Harke, Julian & Mesters, Fabio, 2019. "Quality certification for nonprofits, charitable giving, and donor's trust: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 159(C), pages 75-100.
    4. Christine L. Exley, 2020. "Using Charity Performance Metrics as an Excuse Not to Give," Management Science, INFORMS, vol. 66(2), pages 553-563, February.
    5. Manuel Foerster & Joel (J.J.) van der Weele, 2018. "Persuasion, justification and the communication of social impact," Tinbergen Institute Discussion Papers 18-067/I, Tinbergen Institute.

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    More about this item

    Keywords

    Charitable Giving; Quality and Giving; Information; Laboratory Experiment;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers

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