To Pay or Not to Pay: An Empirical Examination of the Effect of Injunctive Norms on Charitable Donations

Abstract

CHARITABLE ENDEAVORS OFTEN FACE RESOURCE CONSTRAINTS AND RELY ON ALTRUISM FOR MONETARY DONATIONS NECESSARY TO PURSUE MISSION-DRIVEN OPERATIONS. IMPLEMENTATION OF AN HONOR-BASED PAYMENT SYSTEM TO ATTRACT DONATIONS ATTEMPTS TO ELIMINATE SOME PORTION OF THE COSTS ASSOCIATED WITH FUNDRAISING ACTIVITY. HOWEVER, HONOR-BASED SYSTEMS ARE NOT MONITORED AND, THEREFORE, SUSCEPTIBLE TO UNDERPAYMENT AND THEFT. THIS STUDY EXAMINES HOW POSTING A MESSAGE COMMUNICATING A NEGATIVE INJUNCTIVE NORM AFFECTS CHARITABLE DONATIONS RESULTING FROM PROVISION OF A SNACK BOX USING AN HONOR-BASED PAYMENT SYSTEM. THE STUDY FINDS THAT PRESENTATION OF AN INJUNCTIVE NORM DISSUADES CONTRIBUTIONS FROM DONORS INCLINED TOWARD SLIGHT UNDERPAYMENT BUT DOES NOT DETER GROSS UNDERPAYMENT OR THEFT. THE OVERALL EFFECT IS A DECLINE IN DONATIONS. THE STUDY CONCLUDES BY IDENTIFYING INSIGHTS LIKELY TO IMPROVE THE PROBABILITY OF SUCCESSFUL IMPLEMENTATION OF AN HONOR-BASED SNACK BOX INTENDED FOR CHARITABLE PURPOSES. 1 McClough et al.: To Pay or Not to Pay Published by Carroll Collected, 2015 100 INTRODUCTION On January 1, 2008, Radiohead famously debuted its album In Rainbows to its website only, instructing fans to pay whatever they felt the album was worth. Years later we know that fewer than half of the downloads were accompanied by a payment. What is challenging to economists is not that half of the album downloads were not accompanied by a payment, rather that nearly half of them were accompanied by a payment. More recently, an established restaurant chain introduced a “pay-what-youwant” policy intended to make a nutritious bowl of chili available to all — especially to those who needed it. Initial reports suggested that patrons paid a bit more to make the chili available to those unable to pay full price. Whether the program is an innovative pricing strategy or a savvy public relations scheme, the sustainability of the program ultimately is determined by the willingness of customers to cover the costs. Sustainable honor-based payment systems defy economists’ expectations. Why would anyone pay for something if not required to do so? In reality quite a few people make payment voluntarily in exchange for goods and services. This case study examines voluntary contributions associated with a snack box. As with Radiohead and the bowl of chili, payment is entirely voluntary. We test different message strategies to evoke preferred behavior; specifically, we test message strategies to promote larger voluntary contributions.