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Good News, Bad News, and Social Image: The Market for Charitable Giving

Listed author(s):
  • Luigi Butera

    ()

    (The University of Chicago)

  • Jeffrey Horn

    ()

    (General Assembly)

We conduct a laboratory experiment with real donations to test how unexpected information about charities’ qualities and its public visibility affect giving. A perceived increase in charities’ qualities represents a decrease in the price of charitable output, and can generate both an income and substitution effect on nominal giving. On the one hand positive news about charities’ qualities can increase giving, since donors realize that it is cheaper to generate charitable output. On the other hand positive news may crowd-out giving because donors may provide a higher or equal level of charitable output with lower nominal donations. Similarly, if information about quality has a social signaling value, then donors who give to acquire social recognition may perceive quality and quantity of giving as either complements or substitutes in generating social image returns. We find that when information about charities’ qualities is privately received, giving is always increasing in the quality of the news, and bad news has little effect on giving. Differently, when information is public, we find that 34% of donors trade-off the quality and quantity of their gifts. We show that these donors are relatively more motivated by social recognition, and argue that image conscience donors strategically use positive information to reduce giving. Length: 35

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File URL: http://www.gmu.edu/schools/chss/economics/icesworkingpapers.gmu.edu/pdf/1041.pdf
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Paper provided by George Mason University, Interdisciplinary Center for Economic Science in its series Working Papers with number 1041.

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Date of creation: May 2013
Date of revision: Mar 2016
Handle: RePEc:gms:wpaper:1041
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  13. Christina M. Fong, 2007. "Evidence from an Experiment on Charity to Welfare Recipients: Reciprocity, Altruism and the Empathic Responsiveness Hypothesis," Economic Journal, Royal Economic Society, vol. 117(522), pages 1008-1024, 07.
  14. David Eil & Justin M. Rao, 2011. "The Good News-Bad News Effect: Asymmetric Processing of Objective Information about Yourself," American Economic Journal: Microeconomics, American Economic Association, vol. 3(2), pages 114-138, May.
  15. Rege, Mari & Telle, Kjetil, 2004. "The impact of social approval and framing on cooperation in public good situations," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1625-1644, July.
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