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Rational Inattention to Subsidies for Charitable Contributions

Kimberley Scharf and Sarah Smith

The Centre for Market and Public Organisation from Department of Economics, University of Bristol, UK

Abstract: Evidence suggests that individuals fail to process all relevant attributes when making decisions. Recent literature has mainly focused on shrouded attributes. Here we present a simple model where agents rationally choose not to process attributes even when they are not shrouded, and we investigate its predictions for the case of subsidies for charitable donations. These are offered as rebates or matches. Both lower the price of giving, but, crucially, with different implications for rational non-processing choices. Survey and experimental evidence on donation responses to equivalent changes in the match and the rebate is consistent with our model of rational inattention.

Keywords: Tax salience; rational inattention; charitable giving (search for similar items in EconPapers)
JEL-codes: H2 D0 D8 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-exp
Date: 2011-07
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http://www.bristol.ac.uk/cmpo/publications/papers/2011/wp269.pdf (application/pdf)

Related works:
Working Paper: Rational Inattention to Subsidies for Charitable Contributions (2010) Downloads
Working Paper: Rational Inattention to Subsidies for Charitable Contributions (2010) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:bri:cmpowp:11/269

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