'Giving' in to Social Pressure

33 Pages Posted: 13 Jun 2015

See all articles by Alvaro Name Correa

Alvaro Name Correa

Universidad Carlos III de Madrid

Huseyin Yildirim

Duke University - Department of Economics

Date Written: February 28, 2015

Abstract

In light of recent evidence, we develop a theory of charitable giving in which donors feel social pressure from a direct solicitation. We show that equilibrium donations are concentrated around a social norm: donors below the norm increase giving while those above the norm reduce it. Despite a higher level of the public good, relatively poor and/or low altruism givers fare worse under social pressure and would avoid the solicitor at a cost. Aggregate donor welfare improves to the extent that the added social motive alleviates the underprovision of the public good; however, overprovision may result. Our theory therefore predicts a light-handed regulation for charitable solicitations, which is consistent with their exemption from the popular Do Not Call list in the U.S. We further show that contrary to pure altruism, a more equal income distribution may produce more of the public good. In fundraising campaigns where a social norm is not apparent, one may emerge endogenously if donors are not too heterogeneous. In fact, multiple social norms may form, which offers a focal point argument for suggested donations.

Keywords: altruism, social pressure, fundraising, charitable giving

JEL Classification: H00, H30, H50

Suggested Citation

Name Correa, Alvaro and Yildirim, Huseyin, 'Giving' in to Social Pressure (February 28, 2015). Economic Research Initiatives at Duke (ERID) Working Paper No. 190. Available at SSRN: https://ssrn.com/abstract=2617496 or http://dx.doi.org/10.2139/ssrn.2617496

Alvaro Name Correa

Universidad Carlos III de Madrid ( email )

CL. de Madrid 126
Madrid, Madrid 28903
Spain

Huseyin Yildirim (Contact Author)

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States
919-660-1805 (Phone)
919-684-8974 (Fax)

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