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Do Donors Care About the Price of Giving? A Review of the Evidence, with Some Theory to Organize It

Author

Listed:
  • Jade Wong

    (Centre for Social Impact, Australian School of Business, the University of New South Wales)

  • Andreas Ortman

    (School of Economics, Australian School of Business, the University of New South Wales)

Abstract

We study how donors decide which charity to give to. To this end, we construct a theoretical model that clarifies the conditions in which the stand-alone benefit from giving, price of giving, and cost of information acquisition inform giving decisions. The model shows that giving decisions are affected by a price-cost trade-off – a condition where donors care about the price of giving because they want their donations to maximise charitable output, but dislike searching for the price of giving because it is costly. The literature is then reviewed to test the explanatory power of the theoretical model: it seems to support the conjecture that a price-cost trade-off informs donors’ giving decisions.

Suggested Citation

  • Jade Wong & Andreas Ortman, 2013. "Do Donors Care About the Price of Giving? A Review of the Evidence, with Some Theory to Organize It," Discussion Papers 2013-22, School of Economics, The University of New South Wales.
    • Handle: RePEc:swe:wpaper:2013-22
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    File URL: http://research.economics.unsw.edu.au/RePEc/papers/2013-22.pdf
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    References listed on IDEAS

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    Cited by:

    1. Jones, Kristy, 2017. "Government or charity? Preferences for welfare provision by ethnicity," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 66(C), pages 72-77.

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    More about this item

    Keywords

    donations; efficiency; price of giving; price-cost trade-off;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship

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