SPI Funded Paper
Toward an Understanding of why Suggestions Work in Charitable Fundraising: Theory and Evidence from a Natural Field Experiment
This paper was published in Journal of Public Economics in 2014
James T. Edwards, John A. List
University of Chicago
University of Chicago
People respond to those who ask. Within the charitable fundraising community, the power of the ask represents the backbone of most fundraising strategies. Despite this, the optimal design of communication strategies has received less formal attention. For their part, economists have recently explored how communication affects empathy, altruism, and giving rates to charities. Our study takes a step back from this literature to examine how suggestions–a direct ask for a certain amount of money–affect giving rates. We find that our suggestion amounts affect both the intensive and extensive margins: more people give and they tend to give the suggested amount. Resulting insights help us understand why people give, why messages work, and deepen practitioners’ understanding of how to use messages to leverage more giving.
SPI Quick Look:
This study combines theory with a natural field experiment to explore the effect of suggestion amounts on giving. Results show a surprisingly large and economically significant effect of suggesting a donation amount to potential donors. On the extensive margin, the paper finds a nearly 50% increase in the percentage of individuals donating after receiving a generic suggestion. On the intensive margin, observed donations collapse strongly to the suggestion amount. One interpretation is that after a suggestion amount is made, individuals receive a fixed amount of utility from donating at least as much as the suggestion, but little utility from exceeding it. This result suggests that even though altruism is often claimed to be an important driver of donor behavior, in this case the data are more consistent with a model of impure altruism. In terms of optimal fundraising design, this implies that optimal suggestions should be made at an amount greater than the counterfactual donation, but not at an infinitely high amount.