Tan, Lu & Tan on Charitable Giving

Xue Tan, Yingda Lu and Yong Tan have posted Why Should I Donate? Examining the Effects of Reputation, Peer Influence, and Popularity on Charitable Giving Over Social Media Platforms on SSRN with the following abstract:

With the growing popularity of social media, social networking sites have become an important channel for online donor engagement and charitable fundraising. Many crowd-based donation platforms have integrated social functions to encourage donors to announce their donations in social media. Some social networking sites, like Facebook, initiate their own charitable campaigns by collaborating with nonprofit organizations. Despite the great theoretical and practical values, social media users’ motivations for charitable giving are underexplored. Using individual-level data from a microblogging platform where a donation service is embedded, we investigate how individual donation decisions are influenced by reputation incentive design, peer effects, and popularity effects. We find that despite the platform designer’s desire to improve fundraising performance, higher visibility of donors’ contributions may have negative impact on fundraising. Peer effects are found to be positive and, hence, provide a potential solution to the free-rider problem. Finally, it is observed that while most users crowd to popular projects, a group of users who exhibit leadership features crowd out from popular projects. Investing more fundraising effort on this crowding-out group may alleviate the rich-get-richer problem.

— Eric C. Chaffee