A New Mechanism to Alleviate the Crises of Confidence in Science With An Application to the Public Goods Game
Luigi Butera, Philip J. Grossman, Daniel Houser, John A. List, Marie Claire Villeval
NBER Working Paper 26801 (2020)
Creation of empirical knowledge in economics has taken a dramatic turn in the past few decades. One feature of the new research landscape is the nature and extent to which scholars generate data. Today, in nearly every field the experimental approach plays an increasingly crucial role in testing theories and informing organizational decisions. Whereas there is much to appreciate about this revolution, recently a credibility crisis has taken hold across the social sciences, arguing that an important component of Fischer (1935)’s tripod has not been fully embraced: replication. Indeed, while the importance of replications is not debatable scientifically, current incentives are not sufficient to encourage replications from the individual researcher’s perspective. We analyze a novel mechanism that promotes replications by leveraging mutually beneficial gains between scholars and editors. We develop a model capturing the trade-offs involved in seeking independent replications before submission of a paper to journals. We demonstrate the operation of this method via an investigation of the effects of Knightian uncertainty on cooperation rates in public goods games, a pervasive and yet largely unexplored feature in the literature.
Market Design, Human Behavior, and Management
Yan Chen, Peter Cramton, John A. List, and Axel Ockenfels
NBER Working Paper 26873 (2020)
We review past research and discuss future directions on how the vibrant research areas of market design and behavioral economics have influenced and will continue to impact the science and practice of management in both the private and public sectors. Using examples from various auction markets, reputation and feedback systems in online markets, matching markets in education, and labor markets, we demonstrate that combining market design theory, behavioral insights, and experimental methods can lead to fruitful implementation of superior market designs in practice.
How can Bill and Melinda Gates increase other people's donations to fund public goods?
Dean Karlan and John A. List
NBER Working Paper 17954 (2020)
We conducted a fundraising experiment with an international development nonprofit organization in which a matching grant offered by the Bill and Melinda Gates Foundation raised more funds than one from an anonymous donor. The effect is strongest for solicitees who previously gave to other BMGF-supported, poverty charities. With supporting evidence from two other fundraising experiments as well as a survey experiment, we argue this is consistent with a quality signal mechanism. Alternative mechanisms are discussed, and not ruled out. The results help inform theories about charitable giving decision-making, and provide guidance to organizations and large donors on how to overcome information asymmetries hindering fundraising.
A New Mechanism to Alleviate the Crises of Confidence in Science With An Application to the Public Goods Game
Luigi Butera, Philip J. Grossman, Daniel Houser, John A. List, Marie Claire Villeval
NBER Working Paper 26801 (2020)
Creation of empirical knowledge in economics has taken a dramatic turn in the past few decades. One feature of the new research landscape is the nature and extent to which scholars generate data. Today, in nearly every field the experimental approach plays an increasingly crucial role in testing theories and informing organizational decisions. Whereas there is much to appreciate about this revolution, recently a credibility crisis has taken hold across the social sciences, arguing that an important component of Fischer (1935)’s tripod has not been fully embraced: replication. Indeed, while the importance of replications is not debatable scientifically, current incentives are not sufficient to encourage replications from the individual researcher’s perspective. We analyze a novel mechanism that promotes replications by leveraging mutually beneficial gains between scholars and editors. We develop a model capturing the trade-offs involved in seeking independent replications before submission of a paper to journals. We demonstrate the operation of this method via an investigation of the effects of Knightian uncertainty on cooperation rates in public goods games, a pervasive and yet largely unexplored feature in the literature.
Fundraising Design: Key Issues, Unifying Framework, and Open Puzzles
Ernan Haruvy, Peter Popkowski Leszczyc, Greg Allenby, Russell Belk, Catherine Eckel, Robert Fisher, Sherry Xin Li, John A. List, Yu Ma, Yu Wang
(2020)
We offer a unified conceptual, behavioral, and econometric framework for optimal fundraising that deals with both synergies and discrepancies between approaches from economics, consumer behavior and sociology. The purpose is to offer a framework that can bridge differences and open a dialogue between disciplines in order to facilitate optimal fundraising design. The literature is extensive, and our purpose is to offer a brief background and perspective on each of the approaches, provide an integrated framework leading to new insights, and discuss areas of future research.
When Corporate Social Responsibility Backfires: Theory and Evidence from a Natural Field Experiment
John A. List and Fatemeh Momeni
NBER Working Paper 24169 (2019)
Corporate Social Responsibility (CSR) has become a cornerstone of modern business practice, developing from a “why” in the 1960s to a “must” today. Early empirical evidence on both the demand and supply sides has largely confirmed CSR’s efficacy. This paper combines theory with a large-scale natural field experiment to connect CSR to an important but often neglected behavior: employee misconduct and shirking. Through employing more than 3000 workers, we find that our usage of CSR increases employee misbehavior – 20% more employees act detrimentally toward our firm by shirking on their primary job duty when we introduce CSR. Complementary treatments suggest that “moral licensing” is at work, in that the “doing good” nature of CSR induces workers to misbehave on another dimension that hurts the firm. In this way, our data highlight a potential dark cloud of CSR, and serve to forewarn that such business practices should not be blindly applied.
Toward an Understanding of Corporate Social Responsibility: Theory and Field Experimental Evidence
Daniel Hedblom, Brent R. Hickman, and John A. List
NBER Working Paper 26222 (2019)
We develop theory and a tightly-linked field experiment to explore the supply side implications of corporate social responsibility (CSR). Our natural field experiment, in which we created our own firm and hired actual workers, generates a rich data set on worker behavior and responses to both pecuniary and CSR incentives. Making use of a novel identification framework, we use these data to estimate a structural principal-agent model. This approach permits us to compare and contrast treatment and selection effects of both CSR and financial incentives. Using data from more than 1100 job seekers, we find strong evidence that when a firm advertises work as socially-oriented, it attracts employees who are more productive, produce higher quality work, and have more highly valued leisure time. In terms of enhancing the labor pool, for example, CSR increases the number of applicants by 25 percent, an impact comparable to the effect of a 36 percent increase in wages. We also find an economically important complementarity between CSR and wage offers, highlighting the import of using both to hire and motivate workers. Beyond lending insights into the supply side of CSR, our research design serves as a framework for causal inference on other forms of non-pecuniary incentives and amenities in the workplace, or any other domain more generally.
Toward an Understanding of the Welfare Effects of Nudges: Evidence from a Field Experiment in Uganda
Erwin Bulte, John A. List, and Daan Van Soest
NBER Working Paper 26286 (2019)
Social scientists have recently explored how framing of gains and losses affects productivity. We conducted a field experiment in peri-urban Uganda, and compare output levels across 1000 workers over isomorphic tasks and incentives, framed as either losses or gains. We find that loss aversion can be leveraged to increase the productivity of labor. The estimated welfare costs of using the loss contract are quite modest – perhaps because the loss contract is viewed as a (soft) commitment device.
The Drivers of Social Preferences: Evidence from a Nationwide Tipping Field Experiment
NBER Working Paper 26380 (2019)
Even though social preferences affect nearly every facet of life, there exist many open questions on the economics of social preferences in markets. We leverage a unique opportunity to generate a large data set to inform the who’s, what’s, where’s, and when’s of social preferences through the lens of a nationwide tipping field experiment on the Uber platform. Our field experiment
generates data from more than 40 million trips, allowing an exploration of social preferences in the ride sharing market using big data. Combining experimental and natural variation in the data, we are able to establish tipping facts as well as provide insights into the underlying motives for tipping. Interestingly, even though tips are made privately, and without external social benefits or pressure, more than 15% of trips are tipped. Yet, nearly 60% of people never tip, and only 1% of people always tip. Overall, the demand-side explains much more of the observed tipping variation than the supply-side.
Moral Costs and Rational Choice: Theory and Experimental Evidence
James C. Cox, John A. List, Michael Price, Vjollca Sadiraj, and Anya Samek
NBER Working Paper 22234 (2016)
The literature exploring other regarding behavior sheds important light on interesting social phenomena, yet less attention has been given to how the received results speak to foundational assumptions within economics. Our study synthesizes the empirical evidence, showing that recent work challenges convex preference theory but is largely consistent with rational choice theory. Guided by this understanding, we design a new, more demanding test of a central tenet of economics—the contraction axiom—within a sharing framework. Making use of more than 325 dictators participating in a series of allocation games, we show that sharing choices violate the contraction axiom. We advance a new theory that augments standard models with moral reference points to explain our experimental data. Our theory also organizes the broader sharing patterns in the received literature.
The Effects of Wage Contracts on Workplace Misbehaviors: Evidence from a Call Center Natural Field Experiment
Jeffrey A. Flory, Andreas Leibbrandt, and John A. List
NBER Working Paper 22342 (2016)
Workplace misbehaviors are often governed by explicit monitoring and strict punishment. Such enforcement activities can serve to lessen worker productivity and harm worker morale. We take a different approach to curbing worker misbehavior—bonuses. Examining more than 6500 donor phone calls across more than 80 workers, we use a natural field experiment to investigate how different wage contracts influence workers’ propensity to cheat and sabotage one another. Our findings show that even though standard relative performance pay contracts, relative to a fixed wage scheme, increase productivity, they have a dark side: they cause considerable cheating and sabotage of co-workers. Yet, even in such environments, by including an unexpected bonus, the employer can substantially curb worker misbehavior. In this manner, our findings reveal how employers can effectively leverage bonuses to eliminate undesired behaviors induced by performance pay contracts.
Estimating Social Preferences and Gift Exchange at Work
Stefano DellaVigna, John A. List, Ulrike Malmendier, and Gautam Rao
NBER Working Paper 22043 (2016)
We design a model-based field experiment to estimate the nature and magnitude of workers’ social preferences towards their employers. We hire 446 workers for a one-time task. Within worker, we vary (i) piece rates; (ii) whether the work has payoffs only for the worker, or also for the employer; and (iii) the return to the employer. We then introduce a surprise increase or decrease in pay (‘gifts’) from the employer. We find that workers have substantial baseline social preferences towards their employers, even in the absence of repeated-game incentives. Consistent with models of warm glow or social norms, but not of pure altruism, workers exert substantially more effort when their work is consequential to their employer, but are insensitive to the precise return to the employer. Turning to reciprocity, we find little evidence of a response to unexpected positive (or negative) gifts from the employer. Our structural estimates of the social preferences suggest that, if anything, positive reciprocity in response to monetary ‘gifts’ may be larger than negative reciprocity. We revisit the results of previous field experiments on gift exchange using our model and derive a one-parameter expression for the implied reciprocity in these experiments.
A Glimpse into the World of High Capacity Givers: Experimental Evidence from a University Capital Campaign
Levin, Tova, Steven D. Levitt and John A, List
NBER Working Paper 22099 (2016)
The wealthiest 10% of donors now give 90% of charitable dollars in the U.S., but little is known about what motivates them. Using a natural field experiment on over 5,000 high capacity donors, we find persistence in giving patterns, that signals of program quality influence giving, and that the price of giving is not unduly important. Unlike typical small donors, our givers respond only on the intensive margin, and often with a longer time lag. Our study highlights the value to practitioners of partnering with academics, as our intervention has generated $30 million in incremental donations to the University.
The Making of Homo Honoratus: From Omission to Commission
NBER Working Paper 21210 (2015)
Framing remains one of the pillars of behavioral economics. While framing effects have been found to be quite important in the lab, what is less clear is how well evidence drawn from naturally-occurring settings conforms to received laboratory insights. We use debt obligation to the UK government as
a case study to explore the ‘omission bias’ present in decision making with large stakes. Using a natural field experiment that generates nearly 40,000 observations, we find that repayment rates are roughly doubled when the act is reframed as one of commission rather than omission. We estimate that this reframing of the perceived nature of the action generated over $1.3 million of new yield. We find evidence that this behavior may result from a deliberate ‘omission strategy’, rather than a behavioral bias, as is often assumed in the literature. Our natural field experiment highlights that behavioral economics is much more than a series of empirical exercises to quench the intellectual curiosity of academics.
On the Origins of Dishonesty: From Parents to Children
Daniel Houser, John A. List, Marco Piovesan, Anya Savikhin Samek, and Joachim Winter
NBER Working Paper 20897 (2015)
Acts of dishonesty permeate life. Understanding their origins, and what mechanisms help to attenuate such acts is an underexplored area of research. This study takes an economics approach to explore the propensity of individuals to act dishonestly across different economic environments. We begin by developing a simple model that highlights the channels through which one can increase or decrease dishonest acts. We lend empirical insights into this model by using an experiment that includes both parents and their young children as subjects. We find that the highest level of dishonesty occurs in settings where the parent acts alone and the dishonest act benefits the child rather than the parent. In this spirit, there is also an interesting effect of children on parents’ behavior: in the child’s presence, parents act more honestly, but there are gender differences. Parents act more dishonestly in front of sons than daughters. This finding has the potential of shedding light on the origins of the widely documented gender differences in cheating behavior observed among adults.
Ode to the sea: Workplace Organizations and Norms of Cooperation
Uri Gneezy, Andreas Leibbrandt, and John A. List
NBER Working Paper 20234
The functioning and well-being of any society and organization critically hinges on norms of cooperation that regulate social activities. Empirical evidence on how such norms emerge and in which environments they thrive remains a clear void in the literature. To provide an initial set of insights, we overlay a set of field experiments in a natural setting. Our approach is to compare behavior in Brazilian fishermen societies that differ along one major dimension: the workplace organization. In one society (located by the sea) fishermen are forced to work in groups whereas in the adjacent society (located on a lake) fishing is inherently an individual activity. We report sharp evidence that the sea fishermen trust and cooperate more and have greater ability to coordinate group actions than their lake fishermen counterparts. These findings are consistent with the argument that people internalize social norms that emerge from specific needs and support the idea that socio-ecological factors play a decisive role in the proliferation of pro-social behaviors.
Toward an Understanding of why Suggestions Work in Charitable Fundraising: Theory and Evidence from a Natural Field Experiment
Journal of Public Economics, (2014), Volume: 114, pp. 1-13.
People respond to those who ask. Within the charitable fundraising community, the power of the ask represents the backbone of most fundraising strategies. Despite this, the optimal design of communication strategies has received less formal attention. For their part, economists have recently explored how communication affects empathy, altruism, and giving rates to charities. Our study takes a step back from this literature to examine how suggestions-a direct ask for a certain amount of money-affect giving rates. We find that our suggestion amounts affect both the intensive and extensive margins: more people give and they tend to give the suggested amount. Resulting insights help us understand why people give, why messages work, and deepen practitioners’ understanding of how to use messages to leverage more giving.
Exploring the origins of charitable acts: Evidence from an artefactual field experiment with young children
Economics Letters, (2013), 118(3), pp.431-434.
An active area of research within economics concerns the underpinnings of why people give to charitable causes. This study takes a new approach to this question by exploring motivations for giving among children aged 3–5. Using data gathered from 122 children, our artefactual field experiment naturally permits us to disentangle pure altruism and warm glow motivators for giving. We find evidence for the existence of pure altruism but not warm glow. Our results suggest pure altruism is a fundamental component of our preferences, and highlight that warm glow preferences found amongst adults likely develop over time. One speculative hypothesis is that warm glow preferences are learned through socialization.
Once and Done: Leveraging Behavioral Economics to Increase Charitable Contributions
Amee Kamdar, Steven D. Levitt, John A. List, Brian Mullaney and Chad Syverson
SPI Working Paper Number 25 (2013)
The Importance of Being Marginal: Gender Differences in Generosity
American Economic Review, (2013,P&P), 103(3): pp. 586-90.
Do men and women have different social preferences? Previous findings are contradictory. We provide a potential explanation using evidence from a field experiment. In a door-to-door solicitation, men and women are equally generous, but women become less generous when it becomes easy to avoid the solicitor. Our structural estimates of the social preference parameters suggest an explanation: women are more likely to be on the margin of giving, partly because of a less dispersed distribution of altruism. We find similar results for the willingness to complete an unpaid survey: women are more likely to be on the margin of participation.
How Can Bill and Melinda Gates Increase Other People’s Donations to Fund Public Goods?
NBER Working Paper 17954
We develop a simple theory which formally describes how charities can resolve the information asymmetry problems faced by small donors by working with large donors to generate quality signals. To test the model, we conducted two large-scale natural field experiments. In the first experiment, a charity focusing on poverty reduction solicited donations from prior donors and either announced a matching grant from the Bill and Melinda Gates Foundation, or made no mention of a match. In the second field experiment, the same charity sent direct mail solicitations to individuals who had not previously donated to the charity, and tested whether naming the Bill and Melinda Gates Foundation as the matching donor was more effective than not identifying the name of the matching donor. The first experiment demonstrates that the matching grant condition generates more and larger donations relative to no match. The second experiment shows that providing a credible quality signal by identifying the matching donor generates even more and larger donations than not naming the matching donor. Importantly, the treatment effects persist long after the matching period, and the quality signal is quite heterogeneous–the Gates’ effect is much larger for prospective donors who had a record of giving to “poverty-oriented” charities. These two pieces of evidence support our model of quality signals as a key mechanism through which matching gifts inspire donors to give.
Testing for Altruism and Social Pressure in Charitable Giving
Quarterly Journal of Economics, (2012), 127(1), pp. 1-56.
Every year, 90 percent of Americans give money to charities. Is such generosity necessarily welfare enhancing for the giver? We present a theoretical framework that distinguishes two types of motivation: individuals like to give, e.g., due to altruism or warm glow, and individuals would rather not give but dislike saying no, e.g., due to social pressure. We design a door-to-door fund-raising drive in which some households are informed about the exact time of solicitation with a flyer on their door-knobs; thus, they can seek or avoid the fund-raiser. We find that the flyer reduces the share of households opening the door by 10 to 25 percent and, if the flyer allows checking a `Do Not Disturb’ box, reduces giving by 30 percent. The latter decrease is concentrated among donations smaller than $10. These findings suggest that social pressure is an important determinant of door-to-door giving. Combining data from this and a complementary field experiment, we structurally estimate the model. The estimated social pressure cost of saying no to a solicitor is $3.5 for an in-state charity and $1.4 for an out-of-state charity. Our welfare calculations suggest that our door-to-door fund-raising campaigns on average lower utility of the potential donors.
Charitable Giving Around the World: Thoughts on How to Expand the Pie
CESIfo Economic Studies, (2012), 58(1), pp. 1-30.
One fact that has emerged in modern societies is that people help others. Whether it is donating a few dollars to help feed the poor or volunteering time to help rebuild someone’s life after a natural disaster, people around the globe commonly lend a hand. This study provides an overview of that support, summarizing gifts of both time and money around the globe. We also highlight research that indicates useful ways in which we can enhance the charitable pie. Our discussion revolves around both individual giving and corporate philanthropy, but we focus on empirical insights from recent charitable fundraising field experiments in the Western World. We present information that is useful for policymakers, fundraising practitioners, and academicians.
Charitable donations are more responsive to stock market booms than busts
Economics Letters 110 (2011) 166–169
This paper examines aggregate time series data on individual charitable donations from 1968 to 2007. We find that changes in individual giving show an asymmetric response to changes in the S&P 500: individuals are more responsive to stock market upturns than downturns.
The Market for Charitable Giving
Journal of Economic Perspectives, 25(2) (2011), pp. 157–180
Through good and bad economic times, charitable gifts have continued to roll in largely unabated over the past half century. In a typical year, total charitable gifts of money now exceed 2 percent of gross domestic product. Moreover, charitable giving has nearly doubled in real terms since 1990, and the number of nonprofit organizations registered with the IRS grew by nearly 60 percent from 1995 to 2005. This study provides a perspective on the economic interplay of three types of actors: donors, charitable organizations, and government. How much is given annually? Who gives? Who are the recipients of these gifts? Would changes in the tax treatment of charitable contributions lead to more or less giving? How can charitable institutions design mechanisms to generate the greatest level of gifts? What about the effectiveness of seed money and matching grants?
Small matches and charitable giving: Evidence from a natural field experiment
Journal of Public Economics 95 (2011) 344–350
To further our understanding of the economics of charity, we conducted a natural field experiment. Making use of two direct mail solicitations sent to nearly 20,000 prior donors to a charity, we tested the effectiveness of $1:$1 and $1:$3 matching grants on charitable giving. We find only weak evidence that either of the matches work; in fact, for the full sample, the match only increased giving after the match deadline expired. Yet, the aggregation masks important heterogeneities: those donors who are actively supporting the organization tend to be positively influenced whereas lapsed givers are either not affected or adversely affected. Furthermore, some presentations of the match can do harm, e.g., when an example amount given is high ($75) and the match ratio is below $1:$1. Overall, the results help clarify what might cause people to give and provide further evidence that larger match ratios are not necessarily superior to smaller match ratios.
The Role of Social Connections in Charitable Fundraising: Evidence from a Natural Field Experiment
Journal of Economic Behavior and Organization, (2010), forthcoming.
The economics literature suggests that enhanced social connection can increase trust amongst agents, which can ultimately lead to more efficient economic outcomes, including increased provision of public goods. This study provides a test of whether social connectedness (proxied via agent similarities in race and gender) influences giving to a charitable fundraiser. Using data gathered from more than 2000 households approached in an actual door-to-door fundraising drive, we find limited evidence of the importance of such social connections. A robust result in the data, however, is that our minority solicitors, whether approaching a majority or minority household, are considerably less likely to obtain a contribution, and conditional on securing a contribution, gift size is lower than their majority counterparts receive.
Is a Donor in Hand Better than Two in the Bush? Evidence from a Natural Field Experiment
American Economic Review, (2010), forthcoming
This study develops theory and conducts an experiment to provide an understanding of why people initially give to charities, why they remain committed to the cause, and what factors attenuate these influences. Using an experimental design that links donations across distinct treatments separated in time, we present several insights. For example, we find that previous donors are more likely to give, and contribute more, than donors asked to contribute for the first time. Yet, how these previous donors were acquired is critical: agents who are initially attracted by signals of charitable quality transmitted via an economic mechanism are much more likely to continue giving than agents who were initially attracted by non-mechanism factors.
Rebate Rules in Threshold Public Good Provision
Journal of Public Economics, (2009), 93(5-6), pp. 798-806.
This paper considers how six alternative rebate rules affect voluntary contributions in a threshold public-good experiment. The rules differ by (1) whether an individual can receive a proportional rebate of excess contributions, a winner-takes-all of any excess contributions, or a full rebate of one’s contribution in the event the public good is provided and excess contributions exist, and (2) whether the probability of receiving a rebate is proportional to an individual’s contribution relative to total contributions or is a simple uniform probability distribution set by the number of contributors. The paper adds to the existing experimental economics literature on threshold public goods by investigating both aggregate and individual demand revelation under the winner-take-all and random full-rebate rules. Half of the rules (proportional rebate, winner-take-all with uniform probability among all group members, and random full-rebate with uniform probability) provide total contributions that nearly equal total benefits, while the rest (winner-take-all with proportional probability, winner-take-all with uniform probability among contributors only, and random full- rebate with proportional probability) exceed benefits by over 30%. Only the proportional rebate rule is found to achieve both aggregate and individual demand revelation. Our experimental results have implications for both fundraisers and valuation practitioners.
Matching and challenge gifts to charity: evidence from laboratory and natural field experiments
Experimental Economics, (2008), 11(3), pp. 253-267.
This study designs a natural field experiment linked to a controlled laboratory experiment to examine the effectiveness of matching gifts and challenge gifts, two popular strategies used to secure a portion of the $200 billion annually given to charities. We find evidence that challenge gifts positively influence contributions in the field, but matching gifts do not. Methodologically, we find important similarities and dissimilarities between behavior in the lab and the field. Overall, our results have clear implications for fundraisers and provide avenues for future empirical and theoretical work on charitable giving.
A fundraising mechanism inspired by historical tontines: Theory and experimental evidence
Journal of Public Economics, (2007), 91(9), pp. 1750-1782.
The tontine, which is an interesting mixture of group annuity, group life insurance, and lottery, has a peculiar place in economic history. In the seventeenth and eighteenth centuries it played a major role in raising funds to finance public goods in Europe, but today it is rarely encountered outside of a dusty footnote in actuarial course notes or as a means to thicken the plot of a murder mystery. This study provides a formal model of individual contribution decisions under a modern variant of the historical tontine mechanism that is easily implemented by private charities. Our model incorporates desirable properties of the historical tontine to develop a mechanism to fund the private provision of a public good. The tontine-like mechanism we derive is predicted to outperform not only the voluntary contribution mechanism but also another widely used mechanism: charitable lotteries. Our experimental test of the instrument provides some evidence of the beneficial effects associated with implementing tontine-like schemes. We find that the mechanism has particular power in cases where agents are risk averse or in situations where substantial asymmetries characterize individual preferences for the public good.
Does Price Matter in Charitable Giving? Evidence from a Large-Scale Natural Field Experiment
American Economic Review, (2007), 97(5), pp. 1774- 1793.
We conducted a natural field experiment to further our understanding of the economics of charity. Using direct mail solicitations to over 50,000 prior donors of a nonprofit organization, we tested the effectiveness of a matching grant on charitable giving. We find that the match offer increases both the revenue per solicitation and the response rate. Larger match ratios (i.e., $3:$1 and $2:$1) relative to a smaller match ratio ($1:$1) had no additional impact, however. The results provide avenues for future empirical and theoretical work on charitable giving, cost-benefit analysis, and the private provision of public goods.
Using Lotteries to Finance Public Goods: Theory and Experimental Evidence
International Economic Review, (2007), 48(3), pp. 901-927.
This study explores the economics of charitable fund-raising. We begin by developing theory that examines the optimal lottery design while explicitly relaxing both risk-neutrality and preference homogeneity assumptions. We test our theory using a battery of experimental treatments and find that our theoretical predictions are largely confirmed. Specifically, we find that single- and multiple-prize lotteries dominate the voluntary contribution mechanism both in total dollars raised and the number of contributors attracted. Moreover, we find that the optimal fundraising mechanism depends critically on the risk postures of potential contributors and preference heterogeneity.
Does Price Matter in Charitable Giving? Evidence From a Large-Scale Natural Field Experiment
Dean Karlan and John A. List
NBER Working Paper 12338 (2006)
We conducted a natural field experiment to explore the effect of price changes on charitable contributions. To operationalize our tests, we examine whether an offer to match contributions to a non-profit organization changes the likelihood and amount that an individual donates. Direct mail solicitations were sent to over 50,000 prior donors. We find that the match offer increases both the revenue per solicitation and the probability that an individual donates. While comparisons of the match treatments and the control group consistently reveal this pattern, larger match ratios (i.e., $3:$1 and $2:$1) relative to smaller match ratios ($1:$1) had no additional impact. The results have clear implications for practitioners in the design of fundraising campaigns and provide avenues for future empirical and theoretical work on charitable giving. Further, the data provide an interesting test of important methods used in cost-benefit analysis.
Toward an Understanding of the Economics of Charity: Evidence from a Field Experiment
Quarterly Journal of Economics, (2006), 121(2), pp. 747-782.
This study develops theory and uses a door-to-door fund-raising field experiment to explore the economics of charity. We approached nearly 5000 households, randomly divided into four experimental treatments, to shed light on key issues on the demand side of charitable fund-raising. Empirical results are in line with our theory: in gross terms, the lotteries raised more money than the voluntary contributions treatments. Interestingly, in terms of both maximizing current contributions and inducing participation, we find that a one-standard deviation increase in female solicitor physical attractiveness is similar to that of the lottery incentive.
The impact of challenge gifts on charitable giving: an experimental investigation
Economics Letters, (2003), 79(2), pp. 153-159.
Evidence suggests that contributions to capital campaigns increase with the value of leadership gifts. We examine the response of subjects to the announcement of leadership gifts and its implied change in the campaign’s target. The two effects are partitioned.
The Effects of Seed Money and Refunds on Charitable Giving: Experimental Evidence from a University Capital Campaign
Journal of Political Economy, (2002), 110(1), pp. 215-233.
We design a field experiment to test two theories of fund-raising for threshold public goods: Andreoni predicts that publicly announced ‘seed money’ will increase charitable donations, whereas Bagnoli and Lipman predict a similar increase for a refund policy. Experimentally manipulating a solicitation of 3,000 households for a university capital campaign produced data confirming both predictions. Increasing seed money from 10 percent to 67 percent of the campaign goal produced a nearly sixfold increase in contributions, with significant effects on both participation rates and average gift size. Imposing a refund in- creased contributions by a more modest 20 percent, with significant effects on average gift size.