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Charity as a Signal of Trustworthiness

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  • Sebastian Fehrler

Abstract

Being perceived as trustworthy comes with substantial economic benefits in many situations. Making other people think you are a trustworthy person may, therefore, be an important motive for charity and other forms of prosocial behavior, provided these activities work as signals of trustworthiness. This paper shows that donating money to an NGO substantially raises the other players' beliefs about the donors’ trustworthiness in a simple trust game. Consequently, donors receive higher transfers. The magnitude of these benefits is substantial.
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Suggested Citation

  • Sebastian Fehrler, 2010. "Charity as a Signal of Trustworthiness," Levine's Working Paper Archive 661465000000000347, David K. Levine.
  • Handle: RePEc:cla:levarc:661465000000000347
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    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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