Altruism among Consumers as Donors

Abstract

Like most charitable and non-profit organizations, the arts, cultural institutions and universities often ask individuals for financial gifts to help fund their operations. However, a key difference is that the individuals who are solicited for charitable donations by arts and cultural institutions are oftentimes also purchasing services from the same institution. Thus, an open question is whether, and how, individuals make trade-offs between charitable gifts and consumer purchases from the same institution. We investigate this question in an online experiment that asks Sydneysiders to make a series of decisions between donating to the iconic Sydney Opera House, purchasing merchandise from the Sydney Opera House and keeping money. Our findings show that demand for SOH merchandise and SOH donations are substitutes. Further, we find evidence that increasing the individuals’ awareness of the substitutability between money received from donations and money received from the sale of merchandise, increases the cross-price elasticity. This is particularly true for those individuals who positively identify with the Opera House. Our results suggest that the unique nature of arts, cultural and educational institutions as recipients of donations and providers of services mean that fundraising among “patrons” may crowd-in additional revenue.