Identity’s Shadow Prices: The Case of Charity

Abstract

ABSTRACTThis paper develops a rational action model of charitable giving based on an expanded utility function that includes “identity utility”. The model is used to develop a procedure that can identify, from changes in individual donations over time, whether they are simply reactions to changes in the “prices” of charity--determined by changes in marginal tax rates--or due to changes in donor attitudes towards the charitable causes they support. An approach to using this procedure for market research is proposed.