John List: How Prices Influence Charitable Giving?
Abstract (Via Yale.EDU)
We conducted a natural field experiment to further our understanding of the economics of charity. Using direct mail solicitations to over 50,000 prior donors of a non-profit organization, we tested the effectiveness of a matching grant on charitable giving. We find that the match offer increases both the revenue per solicitation and the response rate. Larger match ratios (i.e., $3:$1 and $2:$1) relative to a smaller match ratio ($1:$1) had no additional impact, however. The results provide avenues for future empirical and theoretical work on charitable giving, costbenefit analysis, and the private provision of public goods
Favorite Excerpt (Via Yale.Edu)
Overall, these results highlight the usefulness of field experimental research examining the relative strength of non-price effects. The fact that responsiveness to a matching grant is partly determined by the political environment, rather than the economics of the matching grant itself, is important and consistent with recent work that reveals the relative importance of noneconomic factors in driving decision-making in charitable giving (Craig Landry, Andreas Lange, List, Michael Price and Nicholas Rupp 2006) and consumer credit (Marianne Bertrand, Dean Karlan, Sendhil Mullainathan, Eldar Shafir and Jonathan Zinman 2006). Manipulations that make salient the importance or effectiveness of a gift can generate further donations (Vesterlund, 2003).20 Clearly, further work is necessary to understand which signals generate such effects. Such work will inform both positive and normative issues in economics. Finally, such results will be useful for theorists and empiricists interested in obtaining deeper insights about the motivations behind the provision of public goods, as well as to non-profits interested in improving their fundraising practices.