Do Donors Care about the Price of Giving? A Review of the Evidence, with some Theory to Organize It

39 Pages Posted: 10 Sep 2013

See all articles by Jade Wong

Jade Wong

UNSW Business School

Andreas Ortmann

UNSW Australia Business School, School of Economics

Date Written: September 9, 2013

Abstract

We study how donors decide which charity to give to. To this end, we construct a theoretical model that clarifies the conditions in which the stand-alone benefit from giving, price of giving, and cost of information acquisition inform giving decisions. The model shows that giving decisions are affected by a price-cost trade-off – a condition where donors care about the price of giving because they want their donations to maximise charitable output, but dislike searching for the price of giving because it is costly. The literature is then reviewed to test the explanatory power of the theoretical model: it seems to support the conjecture that a price-cost trade-off informs donors’ giving decisions.

Keywords: donations, efficiency, price of giving, price-cost trade-off

JEL Classification: D03, L31

Suggested Citation

Wong, Jade and Ortmann, Andreas, Do Donors Care about the Price of Giving? A Review of the Evidence, with some Theory to Organize It (September 9, 2013). UNSW Australian School of Business Research Paper No. 2013-22, Available at SSRN: https://ssrn.com/abstract=2323059 or http://dx.doi.org/10.2139/ssrn.2323059

Jade Wong

UNSW Business School ( email )

UNSW Business School
High St
Sydney, NSW 2052
Australia

Andreas Ortmann (Contact Author)

UNSW Australia Business School, School of Economics ( email )

High Street
Sydney, NSW 2052
Australia

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