Trying and Failing: Biases in Donor Aversion to Rejection

Non‐profit organizations (NPOs) play a critical role in advancing the UN Sustainable Development Goals, directing resources from donors to aid recipients. To achieve this, they often rely on donations of physical goods, which can not only further the mission of the NPO, but also give new life to used goods destined for the landfill. However, not all donations are wanted or needed—the NPO may be space constrained or the donation may be of poor quality. Accepting unwanted donations imposes non‐trivial operational costs on the NPO or its downstream partners. Nonetheless, NPOs often hesitate to reject unwanted items, fearing negative repercussions for future donations. To better understand these repercussions, we study how donors respond to rejection using a controlled experiment. Subjects repeatedly choose whether to complete a real‐effort task that generates a donation, which is rejected with a fixed probability whose value is unknown to them. We measure subjects’ donation decisions and beliefs about the probability that their donations are accepted. We compare these measures against a for‐profit experimental condition wherein the subject, not an NPO, receives the payment generated by the real‐effort task. Our results identify a mechanism by which rejections affect donations: via a reduction in donors’ beliefs about future success. Moreover, we identify a novel instance of self‐serving bias: when high effort is required to make a donation, subjects’ beliefs respond significantly more negatively to rejection in the donation condition than in the for‐profit condition. We propose ways in which NPOs can alleviate this bias.