Embroidered T-shirts, discounted tickets, exclusive concerts, and other charity carrots can sometimes rouse people to donate more time and money to nonprofits. But incentives can also stifle giving, finds Dan Ariely, a professor of behavioral economics at Duke University’s Fuqua School of Business and author of Predictably Irrational. With his colleagues, Ariely shows that when donors’ gifts are public, nonprofits need not gild the lily by offering trinkets—social approbation is reward enough. But when gifts are private, nonprofits should use loot to inspire even greater generosity.
“Part of the reason we give is so that others will think better of us,” Ariely explains. “But when the signals are mixed”—that is, when we cannot clearly convey that we are just doing good, because we are also doing well—“we give less.” Conversely, when no one’s watching, we may need a small prize to unleash our inner altruist.
To explore how incentives can heighten or hinder prosocial behavior, the researchers conducted a laboratory experiment and a field experiment. In both studies, they gave half of the participants a monetary reward for performing tasks (clicking computer keys, riding a stationary bike) that would lead to donations to charities, and gave the other half no such reward. At the same time, the researchers randomly assigned half of the participants to a public condition, in which other people knew about their efforts; and the other half to a private condition, in which their labors went unwatched. Both studies showed that the money inspired greater charitable exertions in the private conditions. But in the public conditions, offering cash for charity either had no effect or actually depressed participants’ charitable output.
Ariely speculates that his team’s findings hold true not only for fundraising gifts, thank-you events, and donor privileges, but also for tax incentives and price breaks. “If I drive a Prius, and you think I’m driving it because I’m a good green guy, then I get to project that image to you. But if my Prius is cheap, then you don’t know whether I’m good or just cheap.”
“Public giving is good, and incentives are good, but you don’t want to mix them,” Ariely adds.
Read more stories by Alana Conner.