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Transaction Costs, the Opportunity Cost of Time and Inertia in Charitable Giving

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Abstract

We conduct a laboratory experiment to analyze the effect transactions costs and inertia have on charitable giving. We conjecture that transaction costs will have a greater effect on donations if the solicitation is received when the opportunity cost of time is high. Inertia could become a factor if people intend to give, but postpone making the payment until they have more time, and having postponed making the donation once, keep doing so. We find evidence of a transaction cost effect, with the size of this effect depending on the opportunity cost of time, but no statistically significant inertia effect.

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  • Stephen Knowles & Maroš Servátka, 2014. "Transaction Costs, the Opportunity Cost of Time and Inertia in Charitable Giving," Working Papers in Economics 14/05, University of Canterbury, Department of Economics and Finance.
  • Handle: RePEc:cbt:econwp:14/05
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    More about this item

    Keywords

    Charitable giving; dictator game; transaction costs; opportunity cost of time; inertia;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers

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