Researchers used two experiments to identify whether the motive for giving in public can be primarily linked to a desire for prestige (the “image” effect) or a hope that a public gift will influence others (the “signal” effect). They found that a desire to improve social image largely explained why public recognition of contributions to charitable organizations increased individual donations in the United States.
Americans gave nearly US$300 billion to charities in 2011, and about 73 percent of that came from individual donors.1 While charitable organizations often rely on outside donations to finance their mission, there is minimal evidence on the relative effectiveness of alternative fundraising schemes aimed at attracting donors. Motivated by the belief that individuals desire public recognition for their generosity, charitable organizations provide a plethora of opportunities for lasting social recognition such as printing donors' names in newsletters and renaming buildings in order to recognize large gifts. Public announcements of gifts could influence giving behavior in two ways: by providing social image benefits and by offering the opportunity to encourage others to give. There is little research that explores the relative importance of these two effects.
Many charitable organizations provide recognition in the form of “giving circles” by publishing the names of donors who contributed over a specified threshold. Often, organizations publish multiple lists, denoting successively higher monetary amounts. These giving circles not only provide social image benefits, but also confer a distinct status to contributors at different levels by giving them a title. For instance, Dwight Hall, a service organization at Yale University, regularly publishes the names of donors who give more than US$100 dollars sorted in three distinct circles in the annual newsletter sent to alumni. The “Friends" circle includes any gift above US$100 and below US$500, the “Benefactor" circle includes gifts of at least US$500 but less than US$1,000, and the “Patrons" circle includes any gift of US$1,000 or more.
Researchers used two experiments to identify whether the motive for giving in public can be primarily linked to a desire for prestige (the “image” effect) or a hope that a public gift will influence others (the “signal” effect).
Testing the image effect: First, researchers conducted a field experiment with Dwight Hall to test the impact of a promise of public recognition on charitable giving. The experiment was conducted as part of their annual phone-a-thon campaign, soliciting financial contributions from the group’s alumni who had donated in previous years. Each phone call began with an explanation of the campaign’s purpose, and concluded with a request for a gift of US$100. Individuals were randomly assigned into one of four groups:
- Comparison: Individuals received no additional information about giving circles.
- 100 Circle Treatment: Individuals were notified that those who donate at least US$100 will become members of the Friend donor circle and have their names published in the Dwight Hall newsletter.
- 500 Circle Treatment: Individuals were notified that those who donate at least US$500 will become members of the Benefactor donor circle and have their names published in the newsletter.
- 100 Circle and 500 Circle Treatment: Individuals were notified that those who donate at least US$100 will become members of the Friends donor circle, those who donate at least US$500 will become members of the Benefactor donor circle, and the names of all donor circle members will be published in the newsletter.
Image effect vs. Signal effect: The results from the field experiment did not answer whether donors give more when they know their gift could be public because of concern for their social image or because they believe they could positively influence the donations of others. To answer this question, researchers conducted a lab experiment during 19 group sessions that incorporated elements of the field experiment (individuals made donations to a real charity) while varying the timing of when individual gift amounts are revealed to the other session participants. To establish a baseline of each individual’s behaviors without the opportunity for public recognition, all participants began by deciding how to divide US$5 between themselves and the Global Fund to Fight AIDS, Tuberculosis, and Malaria.
Participants were then divided into two groups.
- Imaging Treatment: Individuals made two more rounds of decisions on how to allocate the US$5. This group was told that at the end of the third round, all participants’ names and donation amounts would be written on the board.
- Signaling Treatment: Individuals also completed two more rounds, and were told that each person’s name and donation amount would be written on the board after the second round but before the third.
The opportunities for image seeking are identical across the two treatments. However, in the “signaling" treatment, individuals have an additional motive: their gifts could influence the gifts of others in later rounds, allowing the researchers to measure the strength of the signaling motivation. In addition to the data on donations from the simulation, researchers also collected information on personality traits associated with leadership skills and their relationships with other participants.
Impact of the image effect: Of the 4,168 individuals targeted, 13 percent made a donation and the average gift size was UD$186. Across all three treatment groups, mentioning the possibility of publishing names in a newsletter increased the probability that an individual made a donation of any amount by 2.7 percentage points. Mentioning name recognition in a newsletter increases the possibility an individual will donate at least US$100 by 1.8 percentage points and the probability an individual will donate at least US$500 by 0.5 percentage points.
Image effect vs. Signal effect: In the lab experiment, the average gift was slightly higher in round 2, when people’s donations were going to be published for the group to see. Subjects in the signaling treatment gave US$0.13 more in the second round than those in the image treatment (although the increase was not statistically significant).
Researchers found that individuals did not give significantly more in the final (unpublicized) round when gifts from the second round of giving were publicly announced. Individuals gave a wider variety of gift sizes, both larger and smaller, in round three when gifts in round two were revealed. This suggests that providing information from peer giving stimulates individual giving in different directions, and results in a wider range of donation amounts among the group.
The promise of social recognition by charities to donors works because people see it as a way to increase their own status, and not because individuals see it as an opportunity to influence others. These results seem to justify the common fundraising practice of publicly recognizing donors, and also provide evidence that social status, and not pure altruism, is an important driver of charitable giving.