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The Nature of Voluntary Public Good Contributions: When are They a Warm Glow or a Helping Hand?

"Warm glow" has been proposed as an explanation for public good contributions that exceed traditional theoretical predictions, yet little is known about why and when people exhibit warm glow in some voluntary settings. To investigate these issues, this research develops a model for the ``helping hand" hypothesis as an extension of warm glow. The hypothesis asserts that when an external environment faced by the subject seems not to provide a socially optimal level of the public good (non-incentive compatible), the subject, to some degree, gains utility by undertaking socially responsible behavior (offering a helping hand), and thus she over-contributes. Once the mechanism is established to be incentive compatible, the individual no longer offers a helping hand, but instead concentrates on maximizing her personal payoffs as predicted by the Nash equilibrium. Experimental results support the helping hand hypothesis, and show that contributions depend on the efficiency of the mechanism and not whether it is voluntary. We also find that contributions are positively correlated with an induced value of the public good even when free-riding is a dominant strategy in an non-incentive compatible mechanism. This would suggest that people's social preferences depend on an induced value of the public good and possess an efficiency concern.

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File URL: http://www.iuj.ac.jp/workingpapers/index.cfm?File=EMS_2009_08.pdf
File Function: First version, 2009
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Paper provided by Research Institute, International University of Japan in its series Working Papers with number EMS_2009_08.

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Length: 35 pages
Date of creation: Apr 2009
Date of revision:
Handle: RePEc:iuj:wpaper:ems_2009_08
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  1. Andreoni, James, 1990. "Impure Altruism and Donations to Public Goods: A Theory of Warm-Glow Giving?," Economic Journal, Royal Economic Society, vol. 100(401), pages 464-77, June.
  2. Gary Charness & Matthew Rabin, 2003. "Understanding Social Preferences with Simple Tests," General Economics and Teaching 0303002, EconWPA.
  3. Messer, Kent D. & Poe, Gregory L. & Rondeau, Daniel & Schulze, William D. & Vossler, Christian A., 2006. "Exploring Voting Anomalies Using a Demand Revealing Random Price Voting Mechanism," Working Papers 127062, Cornell University, Department of Applied Economics and Management.
  4. James Andreoni & John Miller, 2002. "Giving According to GARP: An Experimental Test of the Consistency of Preferences for Altruism," Econometrica, Econometric Society, vol. 70(2), pages 737-753, March.
  5. repec:att:wimass:9309 is not listed on IDEAS
  6. Keser, Claudia, 1996. "Voluntary contributions to a public good when partial contribution is a dominant strategy," Economics Letters, Elsevier, vol. 50(3), pages 359-366, March.
  7. Attanasio, Orazio & Rios-Rull, Jose-Victor, 2000. "Consumption smoothing in island economies: Can public insurance reduce welfare?," European Economic Review, Elsevier, vol. 44(7), pages 1225-1258, June.
  8. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
  9. Frey, Bruno S & Oberholzer-Gee, Felix, 1997. "The Cost of Price Incentives: An Empirical Analysis of Motivation Crowding-Out," American Economic Review, American Economic Association, vol. 87(4), pages 746-55, September.
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  11. 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.
  12. Ferraro, Paul J. & Rondeau, Daniel & Poe, Gregory L., 2000. "Detecting Other-Regarding Behavior with Virtual Players," Working Papers 179537, Cornell University, Department of Applied Economics and Management.
  13. Marc WILLINGER & Anthony ZIEGELMEYER, 1999. "Framing and cooperation in public good games: an experiment with an interior solution," Working Papers of BETA 9901, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  14. Josef Falkinger, 2000. "A Simple Mechanism for the Efficient Provision of Public Goods: Experimental Evidence," American Economic Review, American Economic Association, vol. 90(1), pages 247-264, March.
  15. Andreoni, James, 1995. "Cooperation in Public-Goods Experiments: Kindness or Confusion?," American Economic Review, American Economic Association, vol. 85(4), pages 891-904, September.
  16. Catherine Eckel & Philip Grossman, 2008. "Subsidizing charitable contributions: a natural field experiment comparing matching and rebate subsidies," Experimental Economics, Springer, vol. 11(3), pages 234-252, September.
  17. 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 1447-58, December.
  18. Deirdre N. McCloskey & Stephen T. Ziliak, 1996. "The Standard Error of Regressions," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 97-114, March.
  19. Moshe Buchinsky, 1998. "Recent Advances in Quantile Regression Models: A Practical Guideline for Empirical Research," Journal of Human Resources, University of Wisconsin Press, vol. 33(1), pages 88-126.
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