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Reputation, Altruism, and the Benefits of Seller Charity in an Online Marketplace

  • Daniel Elfenbein
  • Raymond Fisman
  • Brian McManus

We investigate the impact of charity tie-ins on transaction probabilities and sale prices using a large database of eBay auctions. We examine "natural experiments" of precisely matched clusters of charity and non-charity auctions with identical titles, subtitles, sellers, and start prices. We find a 6 to 14 percentage point increase in sale probability and a 2 to 6 percent greater maximum bid for charity items, depending on the fraction of auction proceeds that is donated to charity. The impact on sale probability and price is most pronounced among sellers without extensive eBay histories, suggesting that consumers view charity as a signal of seller quality and a substitute for reputation. We also find that charity-tied products by all sellers are more likely to sell (and at higher prices) immediately following Hurricane Katrina, implying that consumers derive direct utility from seller charity at times when charity is particularly salient.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15614.

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Date of creation: Dec 2009
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Publication status: published as Charity as a substitute for reputation: Evidence from an online marketplace (with Daniel Elfenbein and Brian McManus), Review of Economic Studies, 2012.
Handle: RePEc:nbr:nberwo:15614
Note: CF IO PE
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