Stochastic Income and Conditional Generosity
34 Pages Posted: 16 Nov 2015 Last revised: 17 Nov 2015
Date Written: November 15, 2015
We study how other-regarding behavior extends to environments with uncertain income and conditional commitments. Should fundraisers ask a banker to donate “if he earns a bonus” or wait and ask after the bonus is known? Standard EU theory predicts these are equivalent; loss-aversion and signaling models predict a larger commitment before the bonus is known; theories of affect predict the reverse. In field and lab experiments, we solicit charitable donations from lottery winnings, varying the timing and conditionality. Conditional donations (“if you win”) are higher than ex-post donations, particularly for males. Males also commit more in treatments where income is certain but the donation’s collection is uncertain. This supports a signaling explanation: it is cheaper to commit to donate before uncertainty is unresolved, thus a larger donation is required to maintain a positive image. This has implications for experimental methodology, for fundraisers, and for understanding pro-social behavior.
Keywords: Social preferences, contingent decision-making, signaling, uncertainty, prospect theory, affective state, gender, charitable giving, public goods, experiments, field experiments, bonuses
JEL Classification: D64, C91, L30, D01, D84
Suggested Citation: Suggested Citation