To Earmark or to Non-Earmark? The Role of Control, Transparency and Warm-Glow

Manufacturing & Service Operations Management, Forthcoming

41 Pages Posted: 30 Aug 2021 Last revised: 3 Oct 2023

See all articles by Özalp Özer

Özalp Özer

Amazon, Supply Chain Optimization Technologies

Gloria Urrea

University of Colorado at Boulder - Leeds School of Business

Sebastián Villa

Anderson School of Management, University of New Mexico

Date Written: June 26, 2023

Abstract

Charities face tension when deciding whether or not to earmark donations; i.e., allow donors to restrict the use of their donations for a specific purpose. Research shows that earmarking decreases operational performance because it limits charities’ flexibility to use donations. However, there is also a common belief that earmarking increases donations. Earmarking is assumed to increase donations through three mechanisms: by (i) giving donors control over their donations, (ii) increasing operational transparency of donations and (iii) changing donors’ levels of altruism and warm-glow. To resolve this tension, we study how, when, and why earmarking affects donors’ decisions. We consider three important decisions donors make that impact the fundraising outcome: (i) preference between earmarking and non-earmarking, (ii) decision to donate or not (i.e., donor activation) and (iii) the donation amount. We design three online experiments that allow us to quantify the effect of earmarking on donors’ decisions and to investigate the role of the three aforementioned mechanisms in fundraising. Our results reveal, for example, that earmarking activates more donors but it does not always increase donation amounts. In addition, we determine the conditions under which the three mechanisms affect the outcome of fundraising campaigns. Our findings provide actionable insights for how charities can design fundraising campaigns more effectively and suggest when to leverage earmarking and the three mechanisms depending on the charities’ fundraising goals.

Keywords: earmarking, donations, operational transparency, warm-glow, behavioral operations

Suggested Citation

Özer, Özalp and Urrea, Gloria and Villa, Sebastián, To Earmark or to Non-Earmark? The Role of Control, Transparency and Warm-Glow (June 26, 2023). Manufacturing & Service Operations Management, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3907401 or http://dx.doi.org/10.2139/ssrn.3907401

Özalp Özer

Amazon, Supply Chain Optimization Technologies ( email )

Bellevue, WA 98033
United States

Gloria Urrea (Contact Author)

University of Colorado at Boulder - Leeds School of Business ( email )

Boulder, CO 80309-0419
United States

Sebastián Villa

Anderson School of Management, University of New Mexico ( email )

Albuquerque, NM 87131
United States

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