The Economics of Donations and Enlightened Self-Interest

Abstract

This paper is an empirical study of what motivates individuals to donate to a charity. It is based on a unique dataset from the English National Opera (ENO) which includes detailed information on attendance and both granted and actually consumed bene…ts by all donors. We …nd that individuals clearly respond to incentives. However, only some individuals are motivated exclusively by private bene…ts. As the ENO advertises that donations are used to fund new productions, we …nd evidence that individuals are indeed willing to fund public goods, even though they could potentially free-ride. Moreover, we …nd that donors who attend special events or new productions develop a loyalty towards the charity and increase their donations over time. Finally, individuals are sensitive to social pressure and network connections. These results can help charities to refocus the design of their fund-raising campaigns.

Keywords: Donations, altruism, charities, public good

JEL Classification: D1, D64, H41, L3