Charitable Motives and Bidding in Charity Auctions

Management Science, Forthcoming

30 Pages Posted: 6 May 2006 Last revised: 30 Jan 2013

See all articles by Peter T. L. Popkowski Leszczyc

Peter T. L. Popkowski Leszczyc

University of Queensland - Business School

Michael H. Rothkopf

Rutgers University, Piscataway

Date Written: November 2009

Abstract

Research on bidding in auctions has generally relied on the assumption of self-interested bidders. This work relaxes that assumption in the context of charity auctions. As understanding charitable motives has important implications for auction design and charities’ fundraising strategies, this study investigates bidders’ specific types of charitable motives and the strength of these motives. We carry out three controlled field experiments consisting of real-life auctions conducted on a local Internet auction site. We use a novel design in which we simultaneously run charity and non-charity auctions for identical products, and vary the percentage donated to charity. Results show that auctions with proceeds donated to charity lead to significantly higher selling prices, a result due to a higher bidding by bidders with charitable motives rather than to increased bidder entry. We also find that increased prices only occur when the charitable donation is a percentage of the auction revenue, and that a fixed charitable donation associated with each auction has no effect on prices. Furthermore, we find that prices are increasing in the percentage donated to charity. We find considerable support for a model of voluntary shill-like bidding, where charitable bidders try to increase proceeds in charity auctions. We also find that auctions with 25% of revenue donated to charity had higher net revenue than non-charity auctions. Hence, companies may be able to use charity auctions as part of a corporate social responsibility strategy and at the same time increase profitability even though they donate part of the proceeds to charity.

Keywords: charity auctions, charitable motives, controlled field experiments

JEL Classification: D12, M14, M39, C93

Suggested Citation

Popkowski Leszczyc, Peter T. L. and Rothkopf, Michael H., Charitable Motives and Bidding in Charity Auctions (November 2009). Management Science, Forthcoming. Available at SSRN: https://ssrn.com/abstract=899296

Peter T. L. Popkowski Leszczyc (Contact Author)

University of Queensland - Business School ( email )

Brisbane, Queensland 4072
Australia

Michael H. Rothkopf

Rutgers University, Piscataway ( email )

Rutgers Business School and RUTCOR
Rutcor Modular Bldg, Room 121
Piscataway, NJ 08854
United States
732-445-0266 (Phone)
732-445-5472 (Fax)

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