Is Charitable Giving a Zero-Sum Game? The Effect of Competition Between Charities on Giving Behavior

Abstract

The competition for donations between charities is tough. Yet, little is known about how giving behavior is affected by competition between charities. Do people have a need to satisfy their demand for giving by contributing to a particular charity? Or can the demand for doing good be satisfied by giving to any organization? In a donation dictator game, I vary competition between charities by (i) altering the set of similar real charities to which subjects can donate and (ii) changing the relative price of giving to a randomly selected charity in the choice set by introducing a matching grant. I find weak substitution between charities when giving to more than one charity is possible, as the donated amounts to individual charities decrease with the size of the choice set. At the same time, aggregate giving to all charities increases when charities are in competition. Intensified competition through an increase in the charitable giving market seems to attract new giving and increases overall public good provision. Price competition, however, does not attract new donations when market size is constant and charities compete for donations. These findings carry important insights for managers of nonprofit organizations and provide information on how to improve existing fundraising strategies. This paper was accepted by Yan Chen, decision analysis.