Navigating the Notches: Charity Responses to Ratings

Jennifer Mayo

Journal of Political Economy Microeconomics, 2025, vol. 3, issue 1, 98 - 137

Abstract: This paper studies donor and nonprofit responses to the star rating system designed by Charity Navigator. I find that charities respond to the rating system by changing their behavior to move above the star thresholds, leading to “bunching.” This response is equivalent to charities reducing spending on administration by half, partially driven by charity misreporting. Moreover, donors reward charities based on these ratings, such that crossing the threshold from 3- to the highest 4-star rating raises contributions by 6%. These results highlight the importance of optimal rating design, including charity incentives, cognitive shortcuts, and the need for monitoring.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://dx.doi.org/10.1086/732241 (application/pdf)
http://dx.doi.org/10.1086/732241 (text/html)
Access to the online full text or PDF requires a subscription.

Related works:
Working Paper: Navigating the Notches: Charity Responses to Ratings (2023)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:jpemic:doi:10.1086/732241

Access Statistics for this article

More articles in Journal of Political Economy Microeconomics from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().