Working Paper 14/336 - Abstract

Giving and Probability (PDF, 1,807kB)

Christian Kellner, David Reinstein, Gerhard Riener, and Michael Sanders

When and how should a fundraiser ask for a donation from an individual facing an uncertain bonus income?

A standard model of expected utility over outcomes predicts that the individual’s before choice – her ex-ante commitment conditional on her income – will be the same as her choice after the income has been revealed.  Deciding “if you win, how much will you donate?” involves a commitment (i) over a donation for a state of the world that may not be realized and (ii) over uncertain income. Models involving reference-dependent utility, tangibility, and self-signaling predict more giving before, while theories of affect predict more giving after. In our online field experiment at a UK university, as well as in our laboratory experiments in Germany, charitable giving was significantly larger in the Before treatment than in the After treatment for male subjects, with a significant gender differential. Lab treatments isolated distinct mechanisms: for men, donations were higher in all treatments where the donation’s collection was uncertain, whether or not the income was known. This supports a (self)-signaling explanation: commitments realized with a lower probability must involve larger amounts to have the same signaling power. Our results are directly relevant to fundraising and volunteer-recruitment strategies, and offer further evidence that we need to exercise caution in applying expected-utility theory in the presence of
social preferences.