Faculty Research: The Journal Science Highlights Charitable Giving and Shared Social Responsibility

Ayelet Gneezy

In recent years, the recession has negatively impacted many individuals and organizations across the country, particularly charities. Private donations fell by 6 percent in 2008, the largest drop since Giving USA started tracking these numbers more than 50 years ago, according to a recent Wall Street Journal article.

Based on their recent research, two Rady School professors have proposed a new form of charitable giving that could improve donation rates. Their suggested model would allow donors to take greater ownership in their contributions with a pay-what-you-want model. This new model can be more profitable for both businesses and charities than standard pricing, according to a study by Rady professors Ayelet Gneezy and Uri Gneezy, published this summer in the journal Science.

In the study of more than 113,000 theme park visitors, people went on a ride where a photograph was taken of them that they could purchase at the exit, according to the paper by Drs. Gneezy and Professor Leif D. Nelson from UC Berkeley and Amber Brown from Disney Research. Some days, people could buy the picture for $12.95, with half the revenue advertised as going to charity. On other days, people could choose their price, with the understanding that half the revenue went to charity.

The days with the pay-what-you-want option and half the revenue going to charity produced the highest profits to the company and the biggest support to the charity. This research proposes and supports a new model for corporate social responsibility — shared social responsibility — in which businesses allow consumers to express their own social preferences when giving back to the community.

People identify themselves more closely with the purchases and resulting donations when they choose their own price, according to the study. In addition, individuals do not infer sinister motives from the company because the company risks not earning any money.