The Coin Strategy and Charitable Giving

Abstract

I asked a cooperative charity whose headquarters is located in Seoul, South Korea, to send out 16,000 solicitation letters of four types with each of the four groups having a different attachment: no attachment, 100 Korean won, 500 Korean won, or a 500-won-sized medallion. This was done to better understand the philanthropy initiatives and individuals' social preferences by collecting responses and comparing them by letter type. The charity received one donation and 381 'active' returns in eight weeks. Attaching a real coin to the letter did not bring a significantly positive effect, although some charities including UNICEF have used this 'coin strategy.' A sense of involuntary indebtedness does not seem to be one of the major driving forces behind reciprocity. The coin attachment appeals to the potential donor's inequity aversion: A significantly larger proportion of mail recipients returned the letter that was sent with 100 Korean won than returned the letters sent with no attachment. I also claim that the results of previous studies that selected solicitation recipients from the existing database should be extrapolated with extra care due to the sample selection bias.

Keywords: Charitable giving, Inequity aversion, Field experiments

JEL Classification: C93, H41