Self-Signaling and Prosocial Behavior: A Cause Marketing Experiment

Abstract

We test an information theory of prosocial behavior whereby ego utility and self-signaling crowd out the effect of consumption utility on choice. The data come from two field experiments involving purchases of a consumer good bundled with a charitable donation. Across experimental cells, we randomize the price level and the donation level. A model-free analysis of the data reveals non-monotonic regions of demand when the good is bundled with relatively large charitable donations. Subjects also self-report lower ratings of “feeling good about themselves” when offered bundles with large donations and price discounts. The evidence suggests that price discounts crowd out consumer self-inference of altruism. Alternative motivation-crowding theories are rejected due to their inability to explain the non-monotonic data moments.

The standard use of interaction effects and other falsification checks to explore the underlying choice mechanism in an experimental setting is complicated in our self-signaling context. Instead, a novel feature of our analysis consists of using the experimental data to estimate the structural form of a model of consumer demand with self-signaling. We specify a model in which consumers obtain both consumption and ego utility from their choices. Ego utility derives from a consumer's posterior self-beliefs after making her choice. An estimator is proposed that handles the potential multiplicity of equilibria that can arise in the self-signaling model. The model estimates allow us to quantify the economic role of ego utility and to explore the underlying signaling mechanism. Nested tests reject the hypothesis of no self-signaling. Alternative model specifications that potentially allow for non-montonic demand without the self-signaling structure exhibit an inferior fit to the data. The model estimates imply that consumer response to the donations are mainly driven by ego utility and not by consumption utility (i.e. not by altruistic motives). By combining a field experiment and a structural model, these findings contribute to a growing literature on self-signaling and consumer behavior by quantifying the magnitude of self-signaling on preferences and choices. The results also have implications for the design of a cause marketing campaign and the potential negative synergies between price and non-price promotions.

Keywords: self-signaling, discrete-choice games of incomplete information, behavioral economics, prosocial behavior, cause marketing

JEL Classification: D4, D81, L00, M31