Motivating collection effort

By Vinayak

I post this with a tepid sense that I may be discussing an already well-established phenomenon... but since it's the first time I encountered it, it was worth a word or two.

Continuing with my earlier request to donate to the relief effort, my friends who work for AID in Boston's MIT chapter (which was has brought in the largest amount of money in the last three days - upwards of $500,000) told me to request people to visit this website that matches money that comes in. Basically, this web portal designed for expatriate Indians is trying to raise funds through two ways - a kind of 'upper class' and a 'passenger class' system. Sulekha, the portal's name, basically puts out a notice saying (text in brackets added by me to indicate a summary of the continued text):

"Sulekha has created a large matching fund (see above for latest amount) with magnanimous donations from its members, well-wishers and corporate clients/partners worldwide (see complete donor list below). This fund will match dollar-for-dollar all contributions made through Sulekha to AID on this site. If you are an individual or a corporation interested in becoming a matching fund donor" (get in touch....)

This effectively means that there are two ways to contribute - the big guns can donate to the 'matching fund' and people like me can make contributions to the regular fund which gets 'matched' by funds from the matching fund. Effectively, there is just one huge collection, but what I found particularly interesting was the psychological effect it has on the 'passenger class'. I was at the Albany Temple today, where I was talking to the board about where their money is going. They have earmarked a percentage of the money towards AID, and were excited about channeling it through Sulekha's 'matching' system. This 'matching' fund idea seems to inspire people into giving with a happy face - their money is being 'doubled'.

However, the counterproductive side to this is that people might be urged to give less... under the impression that the funds will be 'doubled' anyway. This could be potentially less effecient a means of collections than just a single channel of giving. However, the counterproductive side to that is that perhaps many of the larger donors wouldn't have the status of being a 'Fund Contributor'.

Does this make any sense?

-- January 2, 2005 3:20 PM |

Comments

Kevin Brancato wrote:

Isn't that a classic question economists have of charity? If you give, is it for your utility directly, or for the recipient's?

If for yourself, you might donate the whole amount even with doubling, because you just care to give.

But if you care for solely for the recipient's welfare, you'll give half with doubling, so the recipient winds up exactly where you wanted him....

This is poor economic analysis... and I doubt many people cut donations because of explicit matching contributions... but I'm just trying to get the general flavor of the argument...

-- January 2, 2005 3:44 PM ∞

Brandon Berg wrote:

As I see it, both factors are usually in play, to varying extents. Most people are motivated to some degree by the desire to be able to say (or think) "I donated $X to charity Y". But most people are also motivated to some degree by the vicarious enjoyment of beneficiaries.

Regardless of motives, one will donate money to the point where the marginal cost of donating more equals the marginal benefit. The benefit that comes from the first motive probably isn't affected by matching. For the second motive, the marginal benefit increases, because you can do twice as much with any given dollar. I would expect people to donate more as a result.

-- January 2, 2005 5:39 PM ∞

Vinayak wrote:

I understand your point and intuitively expect people to donate more as well, but now that you can do twice with any given dollar, can't your money now do more than it used to leading to a kind of income/substitution effect on your original intent - the result of which is ambiguous?

-- January 2, 2005 10:25 PM ∞

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