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
Date Written: September 9, 2013
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: Suggested Citation