Who gives a franc? an experimental analysis of how and why people give

Hundreds of billions of dollars are donated to charity by individuals each year. Despite this, relatively little is known about what motivates people to give or their decisions of whom, or how, to give. Researchers and philanthropists alike are challenged with trying to understand how donors make decisions. This thesis uses experimental methodology to further understand the economics of philanthropy. The chapters contained in this dissertation investigate the role of motivations, paternalism, ethnicity and uncertainty in charitable giving using variations on the real donation experiment in the laboratory. In Chapters 1 and 2, I investigate the role of ethnicity and paternalism in giving by varying the intended beneficiary of charity and by giving donors the option to restrict how the donation can be spent by that recipient. Chapter 2 extends the analysis by identifying the different motivations of donors. In Chapter 3, I observe how institutional uncertainty influences donor giving, and the role of the intermediary. In Chapter 4 I examine individual preferences for government welfare versus charity, and whether these preferences depend on the ethnicity of the organisation’s intended beneficiaries. The major finding across all four chapters is that donors are heterogeneous in their decision making: donors’ motivations for giving swing from entirely egotistical to entirely altruistic; some donors refuse to act paternalistically even when it is free while others choose to restrict their donation even at a personal cost; some donors decrease their donations in response to uncertainty while others, by contrast, increase their donations to compensate the beneficiaries for risk. These findings are important in furthering the understanding of charitable giving in the laboratory, as well as in their application to real-world giving. They suggest that the different motivations of donors as well as the specific context of giving are both important in determining donation outcomes. To be effective fundraisers, charities need to be aware of the heterogeneity of donors – a one-size fits all approach is unlikely to be successful.