Optimal Incentives to Give

Marco Castillo () and Ragan Petrie
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Marco Castillo: Texas A&M University

No 13321, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We examine optimal incentives for charitable giving with a large-scale field experiment involving 26 charities and over 112,000 unique individuals. The price of giving is varied by offering a fixed match if the donation meets a threshold amount (e.g. "give at least $25 and the charity receives a $25 match"). Responses are used to structurally estimate a model of charitable giving. The model estimates are employed to evaluate the effectiveness of various counterfactual match incentive schemes, taking into account the goals of the charity and donor preferences. Two of these optimal incentives were subsequently implemented in a follow-up field study. They were found to be effective at implementing the desired goals, as predicted by theory and our simulations. Our findings highlight the pitfalls of relying on a particular parameterization of a policy to evaluate effectiveness. The best-guess incentives in our initial field experiment turned out to be ineffective at increasing donations because optimal incentives should have been set higher.

Keywords: charitable giving; mechanism design; field experiment (search for similar items in EconPapers)
JEL-codes: C93 D64 D91 H41 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2020-06
New Economics Papers: this item is included in nep-cmp, nep-des, nep-exp, nep-hrm and nep-ore
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