Stochastic Income and Conditional Generosity

34 Pages Posted: 16 Nov 2015 Last revised: 17 Nov 2015

See all articles by Christian Kellner

Christian Kellner

University of Essex

David Reinstein

University of Essex

Gerhard Riener

Heinrich Heine University Dusseldorf - Duesseldorf Institute for Competition Economics (DICE)

Date Written: November 15, 2015

Abstract

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

Kellner, Christian and Reinstein, David and Riener, Gerhard, Stochastic Income and Conditional Generosity (November 15, 2015). Available at SSRN: https://ssrn.com/abstract=2691027 or http://dx.doi.org/10.2139/ssrn.2691027

Christian Kellner

University of Essex ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

David Reinstein (Contact Author)

University of Essex ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

Gerhard Riener

Heinrich Heine University Dusseldorf - Duesseldorf Institute for Competition Economics (DICE) ( email )

Universitaetsstr. 1
Duesseldorf, NRW 40225
Germany

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