The Crowding-Out Effect of Cause-Marketing on Private Donations

Abstract

We extend the altruism and warm-glow models of charitable giving to incorporate cause marketing, where firms pledge to donate a fixed portion of sales proceeds for each unit of consumer goods sold. Using a general utility framework, we show that under cause-marketing, complete crowding-out is realizable for both pure and impure altruists. We conduct an artefactual field experiment where participants decide between allocating their endowment toward buying donation-tied tokens and directly donating to an individualized charity. We test for cause-marketing charitable giving motivations by varying the source of third-party donations between an exogenous lump-sum transfer and an endogenous transfer that indirectly accrues via private consumption. Our results suggest that on average, cause-marketing contributions arising from private token consumption lead to as much warm-glow utility as direct contributions to the charity.

Keywords: cause-marketing, artefactual field experiment, pure altruism, warm glow