Do Donors Care about Subsidy Type? An Experimental Study

Catherine Eckel and Philip Grossman

Monash Economics Working Papers from Monash University, Department of Economics

Abstract: An individual should be indifferent between a rebate subsidy of rate sr and a matching subsidy of rate sm = sr /(1 - sr), and the total amount received by the charity should be the same regardless of subsidy type. Recent laboratory and field experiments contradict these straightforward predictions of standard economic theory: subjects consistently make decisions that result in larger amounts going to the charity under a matching subsidy than under an equivalent rebate subsidy. This paper tests whether this result is due to rebate-aversion – a preference by donors for a match over a rebate subsidy. Consistent with theory we find no significant preference for one or the other subsidy scheme. We do however find that, as in previous studies, participants selecting the matching subsidy made decisions that resulted in approximately twice the donations of participants selecting the rebate subsidy donated.

Pages: 19 pages
Date: 2006
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Citations: View citations in EconPapers (12)

Published in R. Mark Isaac, Douglas D. Davis, (ed.) Experiments Investigating Fundraising and Charitable Contributors (Research in Experimental Economics, Volume 11), Emerald Group Publishing Limited, pp. 157 - 175, 2006.

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Chapter: Do Donors Care about Subsidy Type? An Experimental Study (2006)
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