When does less information translate into more giving to public goods?
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When does less information translate into more giving to public goods? Billur Aksoy1 · Silvana Krasteva2 Received: 22 August 2018 / Revised: 8 January 2020 / Accepted: 16 January 2020 © Economic Science Association 2020
Abstract This paper theoretically and experimentally investigates the impact of information provision on voluntary contributions to a linear public good with an uncertain marginal per-capita return (MPCR). Uninformed donors make contribution decisions based only on the expected MPCR (i.e. the prior distribution), while informed donors observe the realized MPCR before contributing. The theoretical analysis predicts that the impact of information on average contributions crucially depends on the generosity level of the population, modeled as a stochastic change in the prosocial preferences. In particular, a less generous population increases contributions substantially in response to good news of higher than expected MPCR and reduces contributions relatively little in response to bad news of lower than expected MPCR. The opposite is true for a more generous population. Thus, the theory predicts that information provision increases (reduces) average contributions when the population is less (more) generous. This prediction finds strong support in a two-stage lab experiment. The first stage measures subjects’ generosity in the public good game using an online experiment. The resulting measure is used to create more and less generous groups in the public good lab experiment, which varies the information provided to these groups in the lab. The findings are in line with the theoretical predictions, suggesting that targeted information provision to less generous groups may be more beneficial for public good contributions than uniform information provision. Keywords Information provision · Linear public good game · Other-regarding preferences · Lab experiment JEL Classification H41 · C72 · C90
Electronic supplementary material The online version of this article (https://doi.org/10.1007/s1068 3-020-09643-1) contains supplementary material, which is available to authorized users. * Billur Aksoy [email protected] Extended author information available on the last page of the article
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B. Aksoy, S. Krasteva
1 Introduction Private voluntary contributions have been increasingly viewed as a vital source of funding for public goods. For example, DonorsChoose, a fundraising platform for public school projects, has quickly gained popularity since its inception in 2000 and has raised close to $640 million up-to-date.1,2 Other crowdfunding platforms that fundraise for public projects include Public Good,3 Razoo,4 and Pledge Music.5 Interestingly, while the non-profit sector is growing, with the number of non-profits surpassing 1.5 million, recent evidence suggests that individual donors are often poorly informed when making contributions. According to 2015 Camber Collective survey about private charitable giving in the U.S., “49% of donors don’t know how nonprofits use their money”.6 S
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