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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

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)

Suggested Citation

  • Daniel W. Elfenbein & Brian McManus, 2010. "A Greater Price for a Greater Good? Evidence That Consumers Pay More for Charity-Linked Products," American Economic Journal: Economic Policy, American Economic Association, vol. 2(2), pages 28-60, May.
  • 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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    References listed on IDEAS

    as
    1. 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, pages 329-355.
    2. Dan Ariely & Axel Ockenfels & Alvin E. Roth, 2005. "An Experimental Analysis of Ending Rules in Internet Auctions," RAND Journal of Economics, The RAND Corporation, pages 890-907.
    3. 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.
    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. David P. Baron, 2007. "Corporate Social Responsibility and Social Entrepreneurship," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(3), pages 683-717, September.
    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, September.
    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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    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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