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A commercial gift for charity

Author

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  • Soetevent, Adriaan R.
  • Bao, Te
  • Schippers, Anouk L.

    (Groningen University)

Abstract

Commercial firms are increasingly tying the sales of their products with donations to a charitable cause. Apart from a charitable motive, offering these charity-linked bundles could be a strategic instrument for firms to increase profits. We report the results of an experiment that investigates for different of these schemes whether they are able to increase profits net of the donation, and which donation scheme is most profitable. From a theoretical perspective, given rational agents, complete markets, and absent transaction cost, selling charity-linked bundles should not be profitable even when consumers are altruistic. We find however that sellers who donate 5% of their gross revenues or an equivalent absolute amount do attain significantly higher profits. No such effect is observed when the donation is limited to 2%. Offering charity-linked bundles considerably crowds out private donations by buyers.
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Suggested Citation

  • Soetevent, Adriaan R. & Bao, Te & Schippers, Anouk L., 2016. "A commercial gift for charity," Research Report 16002-EEF, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    • Handle: RePEc:gro:rugsom:16002-eef
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    File URL: http://hdl.handle.net/11370/73991e76-5144-4471-8bc5-82fe2d7a69eb
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    Cited by:

    1. Engelmann, Dirk & Friedrichsen, Jana & Kübler, Dorothea, 2018. "Fairness in Markets and Market Experiments," Rationality and Competition Discussion Paper Series 64, CRC TRR 190 Rationality and Competition.
    2. Owens, Mark F. & Rennhoff, Adam D. & Baum, Charles L., 2018. "Consumer demand for charitable purchases: Evidence from a field experiment on Girl Scout Cookie sales," Journal of Economic Behavior & Organization, Elsevier, vol. 152(C), pages 47-63.

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    More about this item

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship

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