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A Greater Price for a Greater Good? Evidence That Consumers Pay More for Charity-Linked Products

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  • Daniel W. Elfenbein
  • Brian McManus
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    Abstract

    To study whether consumers will pay more for products that generate charitable donations, we analyze data from eBay on charity and noncharity auctions of otherwise identical products. Charity prices are 6 percent higher, on average, than noncharity prices. Bids below the closing price are also higher, as are bids by individuals bidding on identical charity and noncharity products. Bidders appear to value charity revenue at least partially as a public good, as they submit bids earlier in charity auctions, stimulating other bidders to bid more aggressively. Our results help explain why firms may pledge charitable donations, green production, or similar activities. (JEL D12, D44, D64, L81, M14, M31)

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    Bibliographic Info

    Article provided by American Economic Association in its journal American Economic Journal: Economic Policy.

    Volume (Year): 2 (2010)
    Issue (Month): 2 (May)
    Pages: 28-60

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    Handle: RePEc:aea:aejpol:v:2:y:2010:i:2:p:28-60

    Note: DOI: 10.1257/pol.2.2.28
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    1. Dan Ariely & Axel Ockenfels & Alvin E. Roth, 2003. "An Experimental Analysis of Ending Rules in Internet Auctions," CESifo Working Paper Series 987, CESifo Group Munich.
    2. Bajari, Patrick & Hortacsu, Ali, 2003. " The Winner's Curse, Reserve Prices, and Endogenous Entry: Empirical Insights from eBay Auctions," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 329-55, Summer.
    3. David P. Baron, 2007. "Corporate Social Responsibility and Social Entrepreneurship," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(3), pages 683-717, 09.
    4. Jeffrey C. Ely & Tanjim Hossain, 2009. "Sniping and Squatting in Auction Markets," American Economic Journal: Microeconomics, American Economic Association, vol. 1(2), pages 68-94, August.
    5. Douglas D. Davis & Laura Razzolini & Robert Reilly & Bart J. Wilson, 2003. "Raising Revenues for Charity: Auctions versus Lotteries," Working Papers 0301, VCU School of Business, Department of Economics.
    6. Mark Bagnoli & Susan G. Watts, 2003. "Selling to Socially Responsible Consumers: Competition and The Private Provision of Public Goods," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 12(3), pages 419-445, 09.
    7. Neeraj Arora & Ty Henderson, 2007. "Embedded Premium Promotion: Why It Works and How to Make It More Effective," Marketing Science, INFORMS, vol. 26(4), pages 514-531, 07-08.
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    Cited by:
    1. Raphie Hayat & Frank A.G. den Butter & Udo Kock, 2011. "Halal Certification for Financial Products: A Transaction Cost Perspective," Tinbergen Institute Discussion Papers 11-171/3, Tinbergen Institute.
    2. Tonin, Mirco & Vlassopoulos, Michael, 2012. "Social Incentives Matter: Evidence from an Online Real Effort Experiment," IZA Discussion Papers 6716, Institute for the Study of Labor (IZA).
    3. Michael, Delgado & Neha, Khanna, 2010. "Voluntary pollution abatement and regulation in the presence of a green market," MPRA Paper 25026, University Library of Munich, Germany.
    4. Baron, David P., 2011. "Credence attributes, voluntary organizations, and social pressure," Journal of Public Economics, Elsevier, vol. 95(11), pages 1331-1338.
    5. Chiputwa, Brian & Qaim, Matin & Spielman, David J., 2013. "Food Standards, Certification, and Poverty among Coffee Farmers in Uganda," Discussion Papers 161565, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.
    6. Liu, Kang Ernest & Shiu, Ji-Liang & Sun, Chia-Hung, 2013. "How different are consumers in Internet auction markets? Evidence from Japan and Taiwan," Japan and the World Economy, Elsevier, vol. 28(C), pages 1-12.
    7. Mirco Tonin & Michael Vlassopoulos, 2014. "Corporate Philanthropy and Productivity: Evidence from an Online Real Effort Experiment," CESifo Working Paper Series 4778, CESifo Group Munich.
    8. Raphie Hayat & Frank Butter & Udo Kock, 2013. "Halal Certification for Financial Products: A Transaction Cost Perspective," Journal of Business Ethics, Springer, vol. 117(3), pages 601-613, October.
    9. Grimmer, Martin & Bingham, Timothy, 2013. "Company environmental performance and consumer purchase intentions," Journal of Business Research, Elsevier, vol. 66(10), pages 1945-1953.
    10. repec:dgr:uvatin:2011171 is not listed on IDEAS
    11. Yongfu He & Peter Popkowski Leszczyc, 2013. "The impact of jump bidding in online auctions," Marketing Letters, Springer, vol. 24(4), pages 387-397, December.
    12. Louis Amato & Christie Amato, 2012. "Retail Philanthropy: Firm Size, Industry, and Business Cycle," Journal of Business Ethics, Springer, vol. 107(4), pages 435-448, June.
    13. McManus, Brian & Bennet, Richard, 2011. "The demand for products linked to public goods: Evidence from an online field experiment," Journal of Public Economics, Elsevier, vol. 95(5), pages 403-415.
    14. Daniel Elfenbein & Raymond Fisman & Brian McManus, 2014. "Market Structure, Reputation, and the Value of Quality Certification," NBER Working Papers 20074, National Bureau of Economic Research, Inc.

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