Transaction Costs, the Opportunity Cost of Time and Procrastination in Charitable Giving
This paper was published in Journal of Public Economics (in press) in 2015
Stephen Knowles, Maroš Servátka
University of Otago
University of Canterbury
We conduct a laboratory experiment to study whether giving people more time to donate to charity reduces donations. People may intend to donate, but because of the transaction costs of doing so, postpone making the payment until they are less busy, and having postponed making the donation once, keep postponing. We conjecture that transaction costs will have a greater effect on donations if the solicitation is received when the opportunity cost of time is high. We find evidence of a transaction cost reducing donations, with the size of this effect depending on the opportunity cost of time, but no statistically significant evidence that giving people more time to donate increases procrastination and thus reduces donations.
SPI Quick Look:
Do people fail to donate just because the timing of the solicitation is “wrong” (e.g. people are busy at the moment of the solicitation)? Do people procrastinate, and eventually fail to give when they are given too much time to make a donation?
This paper shows that indeed the timing of solicitation is important: the same person might be willing to give if solicited while waiting for a bus (low value of his time), while refuse to give if solicited while he is late for work (high value of his time). On the other hand, the paper does not find that people suffer from procrastination; that is giving people more time to donate does not reduce donations.