Whose Money is it Anyway? Ingroups and Distributive Behavior

Abstract:     
Price theory is often used to explain reactions to rebates and subsidies that are meant to encourage charitable giving. This paper describes the results of a laboratory experiment that tests standard price theory alongside an alternative perspective based on research on the perceptions and behavior of in-groups. Using a modified dictator game, we find that rebates that decrease the price of giving only increase amounts given when they are exogenously funded by the experimenters. When rebates are funded by members of one’s group, the decreased price of giving does not lead to increased amounts given. The result suggests that the presence of an in-group mentality can mediate the relationship between giving and price.

Keywords: dictator game, price theory, altruism, ingroups

working papers series