Ayelet Gneezy

Shared Social Responsibility: A Field Experiment in Pay-What-You-Want Pricing and Charitable Giving

The Greater Good Zero-sum games (if I win, then you lose) offer an easily grasped heuristic for all sorts of social interactions, especially those that involve money. For instance, companies may offer to contribute some portion of their revenues to charitable causes as an inducement to customers, but it is generally assumed that these pass-throughs directly diminish the corporate bottom line. Gneezy et al. (p. 325; see the Perspective by DellaVigna) have designed a framework that encourages both customers and companies to contribute toward social goods, and, in field tests, this design increased charitable contributions as well as corporate revenues. Exchanging goods for money ends up benefiting buyers, sellers, and charities. A field experiment (N = 113,047 participants) manipulated two factors in the sale of souvenir photos. First, some customers saw a traditional fixed price, whereas others could pay what they wanted (including

Pay-what-you-want, identity, and self-signaling in markets

0). Second, approximately half of the customers saw a variation in which half of the revenue went to charity. At a standard fixed price, the charitable component only slightly increased demand, as similar studies have also found. However, when participants could pay what they wanted, the same charitable component created a treatment that was substantially more profitable. Switching from corporate social responsibility to what we term shared social responsibility works in part because customized contributions allow customers to directly express social welfare concerns through the purchasing of material goods.

Paying to Be Nice: Consistency and Costly Prosocial Behavior

We investigate the role of identity and self-image consideration under “pay-what-you-want” pricing. Results from three field experiments show that often, when granted the opportunity to name the price of a product, fewer consumers choose to buy it than when the price is fixed and low. We show that this opt-out behavior is driven largely by individuals’ identity and self-image concerns; individuals feel bad when they pay less than the “appropriate” price, causing them to pass on the opportunity to purchase the product altogether.

Conflict, sticks and carrots: war increases prosocial punishments and rewards

Building on previous research in economics and psychology, we propose that the costliness of initial prosocial behavior positively influences whether that behavior leads to consistent future behaviors. We suggest that costly prosocial behaviors serve as a signal of prosocial identity and that people subsequently behave in line with that self-perception. In contrast, costless prosocial acts do not signal much about ones prosocial identity, so subsequent behavior is less likely to be consistent and may even show the reductions in prosocial behavior associated with licensing. The results of a laboratory experiment and a large field experiment converge to support our account. This paper was accepted by Brad Barber, Teck Ho, and Terrance Odean, special issue editors.

Procrastination of Enjoyable Experiences

Unlike most species, humans cooperate extensively with group members who are not closely related to them, a pattern sustained in part by punishing non-cooperators and rewarding cooperators. Because internally cooperative groups prevail over less cooperative rival groups, it is thought that violent intergroup conflict played a key role in the evolution of human cooperation. Consequently, it is plausible that propensities to punish and reward will be elevated during intergroup conflict. Using experiments conducted before, during and after the 2006 Israel–Hezbollah war, we show that, during wartime, people are more willing to pay costs to punish non-cooperative group members and reward cooperative group members. Rather than simply increasing within-group solidarity, violent intergroup conflict thus elicits behaviours that, writ large, enhance cooperation within the group, thereby making victory more likely.

Avoiding overhead aversion in charity

The tendency to procrastinate applies not only to aversive tasks but also to positive experiences with immediate benefits. The authors propose that models of time discounting can explain this behavior, and they test these predictions with field data and experiments. A multicity study shows that people with unlimited time windows delay visiting desirable landmarks; however, procrastination is reduced when the window of opportunity is constrained. Similarly, people procrastinate in redeeming gift certificates and gift cards with long deadlines more than those with short deadlines, resulting in overall lower redemption rates. These results run counter to participants’ predictions and typical models of impulsive behavior.

A Reference-Dependent Model of the Price–Quality Heuristic

How to increase charitable donations Charities could raise more money from more people if they were to announce that a startup grant had been used to defray overhead expenses. Gneezy et al. told 40,000 potential donors that an initial donation (half of the target amount) would be used as seed money, as a source of matching funds, or for covering administrative and fundraising costs. When the money was assigned to cover administration, twice as many people made donations. Science, this issue p. 632 Both seed money and matching approaches increase charity donation rates and amounts. Donors tend to avoid charities that dedicate a high percentage of expenses to administrative and fundraising costs, limiting the ability of nonprofits to be effective. We propose a solution to this problem: Use donations from major philanthropists to cover overhead expenses and offer potential donors an overhead-free donation opportunity. A laboratory experiment testing this solution confirms that donations decrease when overhead increases, but only when donors pay for overhead themselves. In a field experiment with 40,000 potential donors, we compared the overhead-free solution with other common uses of initial donations. Consistent with prior research, informing donors that seed money has already been raised increases donations, as does a

Field Experimentation in Marketing Research

1:

Financial Incentives for Promoting Colorectal Cancer Screening: A Randomized, Comparative Effectiveness Trial.

1 matching campaign. Our main result, however, clearly shows that informing potential donors that overhead costs are covered by an initial donation significantly increases the donation rate by 80% (or 94%) and total donations by 75% (or 89%) compared with the seed (or matching) approach.

The Effect of Background Music in Shark Documentaries on Viewers' Perceptions of Sharks.

People often use price as a proxy for quality, resulting in a positive correlation between prices and product liking, known as the “price– quality” (P–Q) heuristic. Using data from three experiments conducted at a winery, this article offers a more complex and complete reference-dependent model of the relationship between price and quality. The authors propose that higher prices set higher expectations, which serve as reference points. When expectations are met or exceeded, we observe the familiar P–Q relationship. However, when price is high and quality is relatively low, the product falls short of consumers’ reference point and the P–Q relationship is reversed; thus, people evaluate a low-quality product with a high price more negatively than a low-quality product with a low price. Using the results of a field experiment, the authors discuss implications for pricing considerations and profitability.