Lucy MooreA recent study by two Washington University professors in the Olin School of Business indicates that people purchasing items on eBay are willing to pay more for them if they are affiliated with a good cause.
In a working paper titled “A Greater Price for a Greater Good? The Charity Premium at eBay Giving Works,” Brian McManus, assistant professor of economics, and Daniel Elfenbein, assistant professor of organization and strategy, found that items sold in charitable eBay auctions typically finished at a higher price than similar or identical items sold in regular eBay auctions, thanks to increased bidding by buyers.
According to Elfenbein, it is not surprising that consumers might be willing to pay more for an item associated with charity, though little empirical research on the topic exists.
“If you care about charity, you’ll pay a little more than you normally would for the item,” he said.
According to the professors, the idea for the study came together largely because they both did projects related to this field. McManus wrote a theoretical paper on how people are often willing to pay more for an item in a charitable auction than in a non-charitable auction, and Elfenbein performed research on eBay regarding National Football League tickets.
To perform the study, the duo collected data from both regular eBay auctions and eBay auctions hosted through “Giving Works,” a program in which sellers can choose to donate part or all of their sales revenue to the charity of their choice.
The professors collected data on a variety of items on eBay. After picking an item from a “Giving Works” auction, they would find as close of a match as possible under normal eBay auctions and compare the two results.
“The fact that there are so many non-charity auctions makes the matching process easy,” said Elfenbein.
Additionally, since sellers can vary the percentage of their revenues that will go to charity, the professors examined different percentages, ranging from around 10 to 100 percent.
McManus said that there were two different tiers of results. Items for which 10 percent of revenue went to charity typically observed around a four percent increase in price, and items for which all revenue went to charity saw around an 8 percent increase in price.
Despite the generosity of buyers, the professors also found that as items became more expensive, the percent of the item’s price that people were willing to donate decreased considerably. According to McManus, one reason that this decrease occurred was because more expensive items, especially those for which 100 percent of the revenue goes to charity, have a large implicit donation already present.
“One of the ways to think about it is if the typical price of a Sony PS3 is something like $800, and the full closing price is going to be donated to charity . [the buyers are] already donating $800 to charity, just by willing to buy this item at market price,” said McManus. “They’re not getting much more benefit from paying more than that.”
Elfenbein also suggested that that this occurrence had to do with the charity itself.
“This . suggested that when people are making major donations to charity, they’re much more likely to make it to the charity of their choice,” he said.
Two other major findings emerged from the research, the first of which concerned the auctions from which 10 percent of the final price went to charity.
“The auctions in which people pay 10 percent of their price to charity are interesting to us because we think this tells us something about the types of marketing campaigns that other firms run, where they try to associate their product with some charitable causes or environmentally sound production techniques,” said McManus.
The duo also found that in charity auctions people tend to bid much earlier than in normal auctions, suggesting that customers may attempt to increase the price early on to maximize the final donation while not necessarily having to pay the amount themselves.
“If you and I are going to bid against each other for an item, if I can get you to pay more for the item, I benefit if I also like the charity you’re paying for,” said McManus.
Elfenbein concluded by saying that although the duo has made many interesting findings, the study continues. “We’re still in the midst of it,” he said.