A Japan’s Experimental Comparison of Rebate and Matching in Charitable Giving

Abstract

This study uses a Japanese nationwide sample and experimentally compares rebate and matching, both of which are schemes intended to lower the price of monetary donation. Standard economic theory predicts that the two schemes will have the same effect on individuals’ donation behavior when their donation price is equivalent. However, we conduct an incentivized economic experiment through the Internet on 2,300 Japanese residents, and find that matching, which lowers the donation price by adding a contribution from a third-party, increases individuals’ donation expenditures compared to rebate, which lowers it through a refund from a third-party. Specifically, the experimental result shows that the donation expenditure in a 50% rebate treatment drops by approximately ¥126 compared to the control, while in a 1:1 matching treatment with essentially the same price of donation as the 50% rebate, the expenditure conversely rises by approximately ¥56. This tendency is consistent with the results of previous experimental studies comparing the two schemes. We further empirically confirm that the superiority of 1:1 matching over 50% rebate is not conclusively influenced by the participants’ confusion or misunderstanding, or budget constraint lines’ difference between the two schemes. Although the Japanese government have previously enriched rebate’s content, the level of monetary donations by the Japanese people is still low on an international scale. Based on this study’s findings, we discuss the possibility that implementing matching into the society effectively encourages their donation behavior.

Keywords: Charitable subsidy, Tax incentive, Framing effect, Online experiment

JEL Classification: D91, H20, C91