Charitable Giving under Normative Uncertainty: Experimental Evidence on The Behavioral Impact of Normative Expert Advice

Miguel Costa-Gomes, Philipp Schoenegger

Research output: Working paper

Abstract

When giving to one charity among the many an individual could donate money to, individuals face two types of uncertainty, descriptive and normative uncertainty. Philanthropic decision-making under descriptive uncertainty has been studied widely, though there has been little empirical work on the impact of normative uncertainty on charitable giving. In this paper we report a between-subjects online experiment that compares the effects of free and paid decision-making aid (in the form of information about the charities and advice from experts) to resolve either kind of uncertainty and investigate the impact these aids have on the amount donated and the choice of charity. In the experiment, the amount subjects are willing to pay for this aid is elicited via a Becker-DeGroot-Marschak mechanism. Using a sample of 739 U.S. participants, we find that participants are willing to pay a higher amount for information about the charities than for advice from experts. However, we find that paid aid in the form of advice from experts has a comparable effect on the choice of charity as information about the charities. We also find that paid aid generally has a larger effect on the choice of charity and the amount donated than if this aid is given for free. Further, participants are also more likely to switch their choice of charity after received any decision aids. However, we only find a weak overall reduction of uncertainty, and find that neither type of aid leads to a reduction in self-reported uncertainty about their choices once adjusted for multiple comparisons. Overall, these results suggest that expert advice can have a substantial impact on donor’s choice of charity and donation size in situations of normative uncertainty if it has been paid for, presenting potentially actionable evidence for fundraising efforts and philanthropic decision-making in an online context.
Original languageEnglish
Publication statusPublished - 22 Nov 2021

Keywords

  • Becker-DeGroot-Marschak Mechanism
  • charitable giving
  • expert advice
  • normative uncertainty,
  • sunk cost
  • information

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