Altruism versus social pressure in charitable giving
By Stefano DellaVigna, John A. List, and Ulrike Malmendier
Every year, 90% of Americans give money to charities. There is at least one capital campaign to raise $25 million or more underway in virtually every major population center in North America. Smaller capital campaigns are even more numerous, with phone-a-thons, door-to-door drives, and mail solicitations increasing in popularity. Despite the ubiquity of fund-raising, we still have an imperfect understanding of the motivations for giving and the welfare implications for the giver. One may wonder: what moves all of these people to donate? Is such generosity necessarily welfare-enhancing for the giver?
We argue that there are two types of motivation for giving: individuals like to give, for example, due to altruism or warm glow, and individuals would rather not give but dislike saying no, for example, due to social pressure from the solicitor. The two motivations have very different welfare implications. The altruism (or warm glow) model (Becker 1974; Andreoni 1989, 1990) posits that giving is mostly supply-driven, and that it is utility-maximizing for the giver to give. Under this model, donations unambiguously enhance the giver’s utility as well as societal welfare. The social pressure model (Akerlof and Kranton 2000) posits that giving is mostly demand-driven, and that giving may be utility-reducing for the giver.
We tested for these two types of motivations in the context of in-person, unsolicited donation requests. We designed a door-to-door fund-raiser in which some households are informed about the exact time of solicitation with a flyer on their doorknobs. Thus, they can seek or avoid the fund-raiser. Building on a theoretical model, we designed a field experiment that allows us to test whether giving is welfare-enhancing or welfare-reducing for the giver.
Our field experiment revolves around a door-to-door fundraising drive for two charities, a local children’s hospital, which has a reputation as a premier hospital for children, and an out-of-state charity, unfamiliar to most solicitees. Between April and October 2008, we approached 7, 668 households in the towns surrounding Chicago. The crucial aspect of the experimental design is to allow individuals to sort, that is, to either seek or avoid the solicitor. In our first treatment, a flyer on the doorknob notifies households one day in advance about the one-hour time interval in which a solicitor will arrive at their homes the next day. In the second treatment, Opt-out, the flyer also includes a box to be checked if the household does not want to be disturbed.
This design allows for a simple test of altruism versus social pressure in door-to-door giving. If altruism is the main driver of giving, the flyer should increase both the presence at home and giving. Because giving is utility-enhancing, givers should choose to stay at home. In addition, givers who would like to give in response to the flyer but who find it too costly to be at home should give to the charity via other means, such as mailing a check. Conversely, if social pressure is the main driver of giving, the flyer should lower both the frequency of opening the door and the frequency of giving.
We report four main results, which are similar across the two charities. First, we find that the flyer reduces the share of households opening the door by 9% to 25% and, if the flyer allows checking a Do Not Disturb box, reduces giving by 28% to 42%. The latter decrease is concentrated among donations smaller than $10. These findings suggest that social pressure is an important determinant of door-to-door giving. Second, the simple flyer does not reduce giving. However, the flyer with an opt-out checkbox decreases giving significantly. Third, the decrease in giving in the opt-out treatment is driven by small donations up to $10; donations above $10, instead, increase slightly. Fourth, there is no effect on donations via mail or Internet.
Overall, the reduced-form estimates indicate that both altruism and social pressure are important determinants of giving in this setting, with stronger evidence for the role of social pressure. The lower frequency of households opening the door after receiving a flyer indicates that households are, on average, trying to avoid solicitors, consistent with social pressure. The social pressure interpretation is also consistent with the lack of donations via mail or Internet.
Frequency of (A) Answering the Door, (B) (Unconditional) Giving, and (C) Giving Conditional on Answering the Door Panel A presents the percent of households that answer the door under different treatment. The third set of bars (Opt-out treatment) also shows the percent opting out (shaded colors on top). Panel B displays the percent that give to the charity out of all the households in the treatment group (including those not answering the door). Panel C shows giving conditioned on answering the door, which equals the ratio of the estimated shares of unconditional giving (Figure IVB) and of households answering the door (Figure IVA). All estimates are obtained from regressions that control for randomization fixed effects.
CONCLUSION AND RECOMMENDATION
We find evidence that both altruism and social pressure affect door-to-door charitable giving. We estimate that about half of donors would prefer not to be contacted by the fund-raiser either because they would prefer not to donate, or because they would prefer to donate less. As a result, the estimated average welfare effect of the door-to-door campaigns in our sample is negative. Although this could be used as an argument to introduce a do-not-solicit or do-not-call list for charities, our findings suggest a simple alternative: to provide an opportunity to the households to sort or, even better, to opt out.
We conjecture that our results are likely to extend to other high-pressure approaches to raise money, such as phone-a-thons, charity banquets, auctions, lotteries, and so on, but likely have less explanatory power with lower-pressure approaches, such as mail solicitations. We hope that future research builds on this strategy to provide more evidence on behavioral phenomena.
To read the full article “Testing for Altruism and Social Pressure in Charitable Giving” by Stefano DellaVigna, John A. List, and Ulrike Malmendier in The Quarterly Journal of Economics, please visit: http://www.oxfordjournals.org/page/4446/1.