Do Donors Care About the Price of Giving? A Review of the Evidence, with Some Theory to Organise It

Abstract We study how donors decide about which charity to give to. To this end, we construct a theoretical model that clarifies the conditions under which the stand-alone benefit from giving, the charity price (i.e. the fundraising expenditure and overhead costs claimed by the charity providing services), and the information cost (i.e. the cost of information acquisition) inform giving decisions. We define the price of giving as the sum total of charity price and information cost. The model shows that giving decisions might be affected by a price–information trade-off—a condition where donors care about the charity price because they want their donations to maximise charitable output, but dislike searching for the charity price because it is costly. The literature is then reviewed to test the explanatory power of the theoretical model. The review provides evidence in favour of a price–information trade-off.