Experimental Economics

, Volume 13, Issue 1, pp 14–44 | Cite as

Do preferences for charitable giving help auctioneers?

  • R. Mark Isaac
  • Svetlana Pevnitskaya
  • Timothy C. Salmon
Article

Abstract

Preferences for charitable giving in auctions can be modeled by assuming that bidders receive additional utility proportional to the revenue raised by an auctioneer. The theory of bidding in the presence of such preferences results in a very counterintuitive prediction which is that, in many cases, bidders having preferences for charitable giving does not lead to a substantial revenue advantage for an auctioneer. We test this theory and this prediction with a series of experiments. In one experiment we induce charitable preferences exactly as specified in the model to see if bidders respond to them as predicted. We find that they do. We then conduct a second experiment in which the revenue from the auctions is donated to actual charities to verify the robustness of the prediction when charitable preferences are generated by a more natural source and find again that the theoretical prediction holds: even strong charitable preferences do not result in substantial revenue increases to the auctioneer.

Keywords

Auctions Charitable giving Economic experiments 

JEL Classification

D44 D64 

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

Supplementary material

10683_2009_9227_MOESM1_ESM.xlsx (190 kb)
Below is the link to the electronic supplementary material. (xlsx 1.14 MB)
10683_2009_9227_MOESM2_ESM.xlsx (1.1 mb)
Below is the link to the electronic supplementary material. (xlsx 189 KB)
10683_2009_9227_MOESM3_ESM.pdf (79 kb)
Below is the link to the electronic supplementary material. (pdf 78.8 KB)

References

  1. Andreoni, J., & Petrie, R. (2004). Public goods experiments without confidentiality: a glimpse into fund-raising. Journal of Public Economics, 88(7–8), 1605–1623. CrossRefGoogle Scholar
  2. Carpenter, J., Holmes, J., & Matthews, P. (2008). Charity auctions: a field experiment. The Economic Journal, 118, 92–113. Google Scholar
  3. Corazzini, L., Faravelli, M., & Stance, L. (2007). A prize to give for: an experiment on public good funding mechanisms (Working Paper). University of Milan-Bicocca. Google Scholar
  4. Corns, A., & Schotter, A. (1999). Can affirmative action be cost effective? An experimental examination of price-preference auctions. American Economic Review, 89(1), 291–305. CrossRefGoogle Scholar
  5. Cox, J. C., Roberson, B., & Smith, V. L. (1982). Theory and behavior of single object auctions. In Research in experimental economics (Vol. 2, pp. 1–43). London: JAI Press. Google Scholar
  6. Cox, J. C., Smith, V. L., & Walker, J. M. (1988). Theory and individual behavior of first price auctions. Journal of Risk and Uncertainty, 1, 61–99. CrossRefGoogle Scholar
  7. Davis, D. D., Razzolini, L., Reilly, R., & Wilson, B. J. (2006). Raising revenue for charity: auctions versus lotteries. In D.D. Davis & R.M. Isaac (Eds.), Research in experimental economics (Vol. 11, pp. 49–95). New York: JAI Press. Google Scholar
  8. Elfenbein, D. W., & McManus, B. (2007). A greater price for a greater good? The charity premium in online auctions (Working Paper). Washington University in St. Louis School of Business. Google Scholar
  9. Engelbrecht-Wiggans, R. (1994). Auctions with price proportional benefits to bidders. Games and Economic Behavior, 6, 339–346. CrossRefGoogle Scholar
  10. Engers, M., & McManus, B. (2007). Charity auctions. International Economic Review, 48(3), 953–994. CrossRefGoogle Scholar
  11. Fischbacher, U. (2007). z-Tree: Zurich toolbox for readymade economic experiments. Experimental Economics, 10(2), 171–178. CrossRefGoogle Scholar
  12. Gächter, S., & Fehr, E. (1999). Collective action as a social exchange. Journal of Economics Behavior and Organization, 39(4), 341–369. CrossRefGoogle Scholar
  13. Glazer, A., & Konrad, K. A. (1996). A signaling explanation for charity. American Economic Review, 86(4), 1019–1028. Google Scholar
  14. Goeree, J., & Offerman, T. (2004). The Amsterdam auction. Econometrica, 72(1), 281–294. CrossRefGoogle Scholar
  15. Goeree, J. K., Maasland, E., Onderstal, S., & Turner, J. L. (2005). How (Not) to raise money. Journal of Political Economy, 113(4), 897–918. CrossRefGoogle Scholar
  16. Isaac, R. M., & Schnier, K. (2005a). Sealed bid variations on the silent charity auction (Working Paper). Florida State University. Google Scholar
  17. Isaac, R. M., & Schnier, K. (2005b). Silent auctions in the field and in the laboratory. Economic Inquiry, 43(4), 715–733. CrossRefGoogle Scholar
  18. Ivanova-Stenzel, R., & Salmon, T. C. (2008). Revenue equivalence revisited. Games and Economic Behavior, 64(1), 171–192. CrossRefGoogle Scholar
  19. Morgan, J., Steiglitz, K., & Reis, G. (2003). The spite motive and equilibrium behavior in auctions. Contributions to Economic Analysis & Policy  2(1), Article 5. Google Scholar
  20. Orzen, H. (2008). Fundraising through competition: evidence from the lab (Working Paper). University of Nottingham. Google Scholar
  21. Palfrey, T. R., & Pevnitskaya, S. (2008). Endogenous entry and self-selection in private value auctions: an experimental study. Journal of Economic Behavior and Organization, 66(3–4), 731–747. CrossRefGoogle Scholar
  22. Popkowski-Leszczyc, P. T. L., & Rothkopf, M. H. (2009). Charitable motives and bidding in charity auctions (Working Paper). University of Alberta. Google Scholar
  23. Rege, M., & Telle, K. (2004). The impact of social approval and framing on cooperation in public good situations. Journal of Public Economics, 88(7–8), 1625–1644. CrossRefGoogle Scholar
  24. Salmon, T. C. (2004). Spectrum auctions by the United States federal communications commission. In M.C.W. Janssen (Ed.), Auctioning public assets: analysis and alternatives (pp. 147–176). Cambridge: Cambridge University Press. Google Scholar
  25. Salmon, T. C., & Isaac, R. M. (2006). Revenue from the saints, the showoffs, and the predators: comparisons of auctions with price-preference values. In D. Davis, & R.M. Isaac (Eds.), Research in experimental economics (pp. 1–30). New York: JAI Press. Google Scholar
  26. Schram, A. J., & Onderstal, S. (2009). Bidding to give: an experimental comparison of auctions for charity. International Economic Review, 50(2), 431–457. CrossRefGoogle Scholar
  27. Shachat, J., & Swarthout, J. T. (2002). Procurement auctions for differentiated goods (Working Paper). IBM Research Labs. Google Scholar

Copyright information

© Economic Science Association 2009

Authors and Affiliations

  • R. Mark Isaac
    • 1
  • Svetlana Pevnitskaya
    • 1
  • Timothy C. Salmon
    • 1
  1. 1.Department of EconomicsFlorida State UniversityTallahasseeUSA

Personalised recommendations