Good News, Bad News, and Social Image: The Market for Charitable Giving
George Mason University Interdisciplinary Center for Economic Science (ICES) Working Paper
34 Pages Posted: 19 May 2014 Last revised: 8 Mar 2017
Date Written: March 6, 2017
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.
Keywords: Charitable Giving, Experiments, Information, Social Image, Efficiency
JEL Classification: C91, D64, D83
Suggested Citation: Suggested Citation