Donors are strongly influenced by how much other people have given when it comes to giving online to fundraising websites. A single large donation of £100 increases subsequent amounts given by around £10 and can pay back in 10 donations'' time.
These are among the findings of research by Professor Sarah Smith and colleagues, published in the June 2015 issue of the Economic Journal. Their study shows that ''peer effects'' in charitable giving are important, at least in the online context. But there may be limits to their effectiveness in increasing donations: donors can only be persuaded to raise how much they give up to a point; and peer effects can cause people to give less as well as more.
Why might peer effects be important? It''s not just that donors are competing to be the most generous (or avoiding being the least generous), the researchers comment:
''We think that people have some idea of where they want to be in the distribution of donations – they use the information on previous donations to guide them in how much they give.
''Large donations, particularly if they occur early on, can have a big effect on how much subsequent donors give.''
The researchers analyse over 300,000 donations made on behalf of more than 10,000 individual fundraisers running in the London marathon and using the two biggest fundraising platforms – JustGiving and Virgin Money Giving. This kind of individual fundraising is a major activity: since 2001, more than 1.3 million individual fundraisers have raised in excess of £1.5 billion via JustGiving alone.
Individual fundraisers set up personalised pages on a fundraising platform and invite people – typically their friends, family and work colleagues – to make donations.
All of the online donations are listed in reverse order on the fundraising page with the most recent first. So information on how much has been given and by whom is visible to each donor who arrives at the fundraising page. The researchers use this set-up to look at whether individuals'' donations are affected by how much others have given.
Donations before and after a large donation are shown in the first panel of Figure 1. The pattern is quite striking: donations made after the large donation are clearly larger than donations before. The effect is sizeable: a large donation increases the average donation size by £10 on average. So as a fundraising strategy, a £100 donation would pay back in 10 donations'' time.
There is no evidence that a large donation puts donors off – the rate of donations to a page is unaffected. Also, people who give more to one page after a large donation to not give less to another page later on.
Does a bigger ''large'' donation lead to a bigger response? The general answer is yes, but up to a point. A large donation that is twice the page average increases subsequent donations by £9.40 on average. A large donation that is between five and 10 times the page average increases subsequent donations by £15.20 on average. Yet a large donation that is more than 10 times the page average has the same effect: £15.20.
Peer effects can also cause the value of donations to go down as well as up. Looking at the effect of a small donation, defined as less than half the page average, the second panel of Figure 1 shows that the effect is similarly clear: donations are smaller than the ones that went before. Again, the effect seems sizeable: subsequent donations are around £5 lower following a small donation.
''Peer Effects in Charitable Giving: Evidence from the (Running) Field'' by Sarah Smith, Frank Windmeijer and Edmund Wright is published in the June 2015 issue of the Economic Journal. Sarah Smith is a professor of economics at the University of Bristol. Frank Windmeijer is a professor of econometrics at the University of Bristol. Edmund Wright is a teaching assistant at the University of Bristol.