Saturday, July 23, 2011

Fewer Recipients = More Gifts

Will donors give more if a gift is divided among fewer recipients? 
Experimental research by Professor James Andreoni at the University of California – San Diego suggests that the answer is yes. 

Dr. Andreoni’s charitable giving experiment involved 120 participants.  Each chose to either keep his or her full participation fee, or give part of it to others.   In many cases, matching contributions doubled or tripled any gifts.  Participants decided how much to give in 24 different scenarios.  Each scenario changed the number of recipients or the matching contributions ratio.  To keep the choices realistic, researchers transferred the participants’ fees according to one of their choices selected at random. 

Results indicated that donors gave more when their gift was divided among fewer beneficiaries.  Only 17% of the 120 participants gave the same regardless of the number of beneficiaries.  Most participants gave less as the number of beneficiaries increased.  On average, individuals valued $1 given to each of x recipients at the rate of x0.68.  So, the donor who gave a $1 gift to one recipient would give up only $1.59 to make a $1 gift to each of two recipients.  The same donor would give up only $2.55 to make a $1 gift to each of four recipients.  Put another way, the donor who gave $10 to one recipient would allow a division of the gift between two recipients only with a $5.90 matching gift subsidy.  To have the gift divided among four recipients, the donor would require a matching gift subsidy of $15.50.

The scientific finding is that altruism is “congestible.”  Donors prefer giving greater benefits to fewer people, rather than smaller benefits to more people.  For fundraisers, one lesson from the experiment may be to match donors with smaller groups of beneficiaries where possible.  Connecting a donor with a particular university department, rather than the university as a whole, may produce more gifting.  Similarly, linking a donor with one child affected by famine may generate more gifting than a general appeal for the thousands affected. (Journal of Public Economics, 91, 1731-49).

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