Charitable Motives and Bidding in Charity Auctions
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. Because 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 noncharity 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 noncharity 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.
Volume (Year): 56 (2010)
Issue (Month): 3 (March)
|Contact details of provider:|| Postal: 7240 Parkway Drive, Suite 300, Hanover, MD 21076 USA|
Web page: http://www.informs.org/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Susan Rose-Ackerman, 1996. "Altruism, Nonprofits, and Economic Theory," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 701-728, June.
- Bulow, Jeremy & Klemperer, Paul, 1996. "Auctions versus Negotiations," American Economic Review, American Economic Association, vol. 86(1), pages 180-194, March.
- Richard Engelbrecht-Wiggans, 1987. "On Optimal Reservation Prices in Auctions," Management Science, INFORMS, vol. 33(6), pages 763-770, June.
- Bruno S. Frey & Stephan Meier, 2004. "Social Comparisons and Pro-social Behavior: Testing "Conditional Cooperation" in a Field Experiment," American Economic Review, American Economic Association, vol. 94(5), pages 1717-1722, December.
- Maxim Engers & Brian McManus, 2007. "Charity Auctions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(3), pages 953-994, 08.
- Duncan, Brian, 2004. "A theory of impact philanthropy," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 2159-2180, August.
- Kahneman, Daniel & Knetsch, Jack L., 1992. "Valuing public goods: The purchase of moral satisfaction," Journal of Environmental Economics and Management, Elsevier, vol. 22(1), pages 57-70, January.
- Alvin E. Roth & Axel Ockenfels, 2002.
"Last-Minute Bidding and the Rules for Ending Second-Price Auctions: Evidence from eBay and Amazon Auctions on the Internet,"
American Economic Review,
American Economic Association, vol. 92(4), pages 1093-1103, September.
- Alvin E. Roth & Axel Ockenfels, "undated". "Last-Minute Bidding and the Rules for Ending Second-Price Auctions: Evidence from eBay and Amazon Auctions on the Internet," Papers on Strategic Interaction 2002-32, Max Planck Institute of Economics, Strategic Interaction Group.
- Jeffrey Carpenter & Jessica Holmes & PeterHans Matthews, 2008. "Charity auctions: a field experiment," Economic Journal, Royal Economic Society, vol. 118(525), pages 92-113, 01.
- Min Ding & Jehoshua Eliashberg & Joel Huber & Ritesh Saini, 2005. "Emotional Bidders---An Analytical and Experimental Examination of Consumers' Behavior in a Priceline-Like Reverse Auction," Management Science, INFORMS, vol. 51(3), pages 352-364, March.
- Strahilevitz, Michal & Myers, John G, 1998. " Donations to Charity as Purchase Incentives: How Well They Work May Depend on What You Are Trying to Sell," Journal of Consumer Research, Oxford University Press, vol. 24(4), pages 434-446, March.
- R. Mark Isaac & Kurt Schnier, 2005. "Silent Auctions in the Field and in the Laboratory," Economic Inquiry, Western Economic Association International, vol. 43(4), pages 715-733, October.
- Andreoni, James, 1989. "Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1447-1458, December.
- Arthur J.H.C. Schram & Sander Onderstal, 2009. "Bidding To Give: An Experimental Comparison Of Auctions For Charity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(2), pages 431-457, 05.
- Jacob K. Goeree & Emiel Maasland & Sander Onderstal & John L. Turner, 2005. "How (Not) to Raise Money," Journal of Political Economy, University of Chicago Press, vol. 113(4), pages 897-926, August.
- Atanu R. Sinha & Eric A. Greenleaf, 2000. "The Impact of Discrete Bidding and Bidder Aggressiveness on Sellers' Strategies in Open English Auctions: Reserves and Covert Shilling," Marketing Science, INFORMS, vol. 19(3), pages 244-265, May.
- Popkowski Leszczyc, Peter T.L. & Pracejus, John W. & Shen, Yingtao, 2008. "Why more can be less: An inference-based explanation for hyper-subadditivity in bundle valuation," Organizational Behavior and Human Decision Processes, Elsevier, vol. 105(2), pages 233-246, March.
- Haruvy, Ernan & Popkowski Leszczyc, Peter T. L., 2010. "Internet Auctions," Foundations and Trends(R) in Marketing, now publishers, vol. 4(1), pages 1-75, March.
- 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.
- R. Isaac & Svetlana Pevnitskaya & Timothy Salmon, 2010. "Do preferences for charitable giving help auctioneers?," Experimental Economics, Springer;Economic Science Association, vol. 13(1), pages 14-44, March.
- Hochman, Harold M & Rodgers, James D, 1969. "Pareto Optimal Redistribution," American Economic Review, American Economic Association, vol. 59(4), pages 542-557, Part I Se.
- Romano, Richard & Yildirim, Huseyin, 2001. "Why charities announce donations: a positive perspective," Journal of Public Economics, Elsevier, vol. 81(3), pages 423-447, September.