Experimental Design
This is a within-subject random control trial. This study will elicit participants’ willingness to pay for several products, products to be donated to charity, and bundles of a product and a product for donation. This will allow participants to evaluate the donation and products both singularly and jointly. The study will be a within-subject design in which participants experience all of the following treatments in a random order.
A. Subjects decide the prices at which they are willing to purchase an item
B. Subjects decide the prices at which they are willing to purchase an item to be donated to charity
C. Subjects decide the prices at which they are willing to purchase a combined bundle of an item and an item for charity
The prediction which will be tested is as follows: In the joint evaluation, participants will
inflate their true value of the charitable contribution in order to ‘allow’ themselves to purchase a tempting product and thus place higher value on the combined product donation than on the sum of their value of the product and the donation.
The study will take place at the OSU experimental economics lab. Participants will be paid through a combination of money, products, and donation receipts. The products will be stored at the lab so that subjects can be paid immediately following the experiment. Subjects will receive a show-up fee in addition to their winnings in the experiment. Willingness to pay will be elicited with multiple price lists. Participants will be given a list of choices between a fixed amount of money and a product/donation/bundle (depending on the treatment) plus an amount of money which changes with each list item. This allows us to observe how much money a participant is willing to forego in exchange for a product/donation/bundle.
Following an explanation of multiple price lists and a test of their understanding, participants will be asked to evaluate several products, donations, and bundles using multiple price lists. The order of products evaluated will be randomized so as not to unduly influence decision-making. Subjects will be informed that one row of one evaluation will be chosen for payment (so as to maintain incentive compatibility). Multiple products and donation types are utilized to obtain a wider set of data and so that participants are unlikely to be answering questions about a product and the same product as a part of a bundle immediately following. With multiple products, subjects are less likely to remember their previous evaluations and use them to prime their related decisions. The donations which will be evaluated will be items, for example food donations to a soup kitchen.
The subjects will evaluate projects and donations which retail for $4-5. Products will be tempting but not utilitarian goods and will be purchased and stored in the lab in advance of the experiment. These products could include: Ferrero Rocher chocolate, Haribo gummy bears, Poppi soda, movie tickets, fidget toys, etc. When evaluating the products, participants will be given a multiple price list in which they can choose between the product and a variable amount of money. This amount will be between $0 and $5 with increments of $0.1. Donations will be products such as cans for a local food drive or clothing for a local clothes drive. Donations will also retail for around $4-5. These will be purchased following the experiment based on what participants selected. Participants will receive a donation receipt if their payment includes a donation. When evaluating the donations, participants will be given a multiple price list in which they can choose donating and a variable amount of money. The amounts they will choose from will be between $0 and $5 with increments of $0.1. In evaluating the product-donation bundles, the participants will choose between the bundle and a variable amount of money ranging from $0 to $10.
Prior to being paid, participants will be asked to complete a short survey which will collect their demographic data (age, gender, race, highest level of schooling, major, native language) as well as gain a sense of their attitudes towards altruism. Literature suggests that corporate social responsibility and cause-based marketing is most effective when the cause (Lichtenstein, Drumwright & Braig, 2004) is something the customer cares about and which increases the identification with the company. Therefore, knowing to what extent they believe the product would be an effective and useful donation will help determine if there are other factors affecting their decision making. Participants would also be asked to write what they think the experiment is about to help determine the impact of the experimenter demand effect.