Why Announce Leadership Contributions? An Experimental Study of the Signaling and Reciprocity Hypotheses

J.J.M. Potters, M. Sefton, L. Vesterlund

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Abstract

Why do fundraisers announce initial contributions to their charity?Potential explanations are that these announcements cause future donors to increase their contributions, either because they want to reciprocate the generosity of earlier donors, or because the initial contributions are seen as a signal of the charity's quality.Using experimental methods we investigate these two hypotheses.When only the first donor is informed of the public good's quality, subjects not only copy the initial contribution, but the first donor also correctly anticipates this response.While this result is consistent with both the signaling and the reciprocity explanations, the latter is unlikely to be the driving force.The reason is that announcements have no effect on contribution levels when the quality of the public good is common knowledge.Thus our results provide strong support for the signaling hypothesis.
Original languageEnglish
Place of PublicationTilburg
PublisherMicroeconomics
Number of pages35
Volume2001-100
Publication statusPublished - 2001

Publication series

NameCentER Discussion Paper
Volume2001-100

Keywords

  • funds
  • information
  • public goods

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    Potters, J. J. M., Sefton, M., & Vesterlund, L. (2001). Why Announce Leadership Contributions? An Experimental Study of the Signaling and Reciprocity Hypotheses. (CentER Discussion Paper; Vol. 2001-100). Microeconomics.