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Dimensions of donation preferences: the structure of peer and income effects

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Abstract

Charitable donations provide positive externalities and can potentially be increased with an understanding of donor preferences. We obtain a uniquely comprehensive characterization of donation motives using an experiment that varies treatments between and within subjects. Donations are increasing in peers’ donations and past subjects’ donations. These and other results suggest a model of heterogeneous beliefs about the social norm for giving. Estimation of such a model reveals substantial heterogeneity in subjects’ beliefs about and adherence to the norm. A simple fundraising strategy increases donations by an estimated 30% by exploiting previously unstudied correlations between dimensions of donor preferences.

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Notes

  1. Social norms are commonly recognized rules for appropriate behavior in a social environment (Elster 1989; Ostrom 2000). Norms appear to predict behavior in dictator games (e.g., Andreoni and Bernheim 2009; Krupka and Weber 2013) and donating to a charity (Krupka and Croson 2016; Drouvelis et al. 2019).

  2. A related strand of literature has found that peer-to-peer solicitation can increase donations (Meer 2011; Meer and Rosen 2011; Castillo et al. 2014, 2017). These solicitations may work through social pressure, as in (DellaVigna et al. 2012; Andreoni et al. 2017), which our experiment avoids.

  3. Peer effects have been studied in a wide variety of settings. A few examples of these many papers and settings include criminal behavior (Bayer et al. 2009), energy use (Alcott 2011; Allcott and Kessler 2019), financial decisions (Bursztyn et al. 2014), business management (Cai and Szeidl 2018), participation in public programs (Dahl et al. 2014), science (Waldinger 2012), workplaces (Hjort 2014; Herbst and Mas 2015), and especially in education (reviewed by Epple and Romano 2011, with recent contributions including Duflo et al. 2011; Imberman et al. 2012; Carrell et al. 2013, and Lim and Meer 2019). As in other experimental studies, we overcome the Manski (1993) reflection problem of inferring peer effects from observational data by exogenously varying information about baseline group behavior.

  4. Similarly, Andreoni et al. (2017) study donations solicited outside of a supermarket. In our setting, the seller (of labor) is solicited, as in the donations of eBay sellers (Elfenbein et al. 2012) and in workplace giving campaigns like those conducted by United Way Worldwide.

  5. Earnings can alternatively be varied by randomizing piece rates, which may result in a different set of “compliers” if subjects vary in terms of their preferences between tasks or strength of earnings motivation. The results of our approach turn out to match those of charitable giving studies that randomized piece rates (Tonin and Vlassopoulos 2017; Drouvelis et al. 2019).

  6. Relative to the sequential ordering in Table 1, the second ordering was {1, 2, 3, 9, 4, 5, 6, 7, 8, 10, 11, 12, 14, 13}.

  7. We removed three subjects whose donated amounts varied greatly across scenarios, with respective ranges of £0–14, £0–16, and £2–20. The variance in these choices suggests that these subjects either did not understand the instructions or did not take their choices seriously. Inclusion of these subjects reduces statistical precision but has little effect on the pattern of results.

  8. Seven subjects earned identical amounts in the first two tasks. We code them as being better at math, which will reduce the power of the instrument but allow us to maintain the same sample as in other analyses.

  9. Strategic subjects could form beliefs about labmates’ choices over bonus income and lower their own donations to offset those choices. We consider this unlikely because it would reduce donations, compounding the more standard crowding-out effect, and we do not find any reduction in own donations.

  10. Drouvelis et al. (2019) focus on the effect of bonus income on donations and test whether this can be explained by social norms. Using the incentivized norm elicitation method of Krupka and Weber (2013), Drouvelis et al. (2019) find that subjects believe most people would consider a donation that was between £0 and £1 to be more appropriate if it was given from a bonus of £1 than if it was given from a bonus of £3. Work such as that of Shang and Croson (2009) suggests that giving by others could similarly affect norms, or more generally it may establish a reference point or rule of thumb.

  11. Subjects in the experiment are also potentially constrained by the amount of their income from the experiment. In practice, only two subjects donated all of their income from the experiment.

  12. We drop 22 of the 166 subjects because the Tobit estimation did not converge. Ottoni-Wilhelm et al. (2017) are similarly unable to estimate their model for 7 out of 85 subjects. The share of dropped subjects is slightly greater here because we estimate more parameters per scenario.

  13. The donation is zero for 348 of the 2736 observations. 61 of the 144 subjects give a strictly positive amount in at least one scenario and give zero in at least one other.

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Funding

Funding was provided by Birmingham-Illinois Partnership for Discovery, Engagement, and Education.

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  1. Department of Economics, University of Birmingham, Edgbaston, Birmingham, B15 2TT, UK

    Michalis Drouvelis

  2. CESifo, Munich, Germany

    Michalis Drouvelis

  3. Department of Economics, University of Illinois, 214 David Kinley Hall, MC-707 1407 W. Gregory, Urbana, IL, 61801, USA

    Benjamin M. Marx

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We are grateful to the Birmingham–Illinois Partnership for Discovery, Engagement, and Education for research support. We thank Masaki Aoyagi, Antonio Cabrales, Gary Charness, Tongzhe Li, Mark Ottoni-Wilhelm, Michael Price, Aldo Rustichini, Kimberley Scharf, and seminar participants at the University of Illinois, the University of Southern California, the University of Windsor, the 2017 Annual Conference of the International Institute for Public Finance, the 2017 Association for Research on Nonprofit Organizations and Voluntary Action, Behavioral Exchange 2017, the 2017 Nordic Conference on Behavioural and Experimental Economics, the 2018 Annual Meeting of the Southern Economic Association, and the 2019 Annual Meeting of the American Economic Association for helpful comments. Yuci Chen provided excellent research assistance.

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Drouvelis, M., Marx, B.M. Dimensions of donation preferences: the structure of peer and income effects. Exp Econ 24, 274–302 (2021). https://doi.org/10.1007/s10683-020-09661-z

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