Seminar: A Commercial Gift to Charity

Time: 13.00-14.00 hours
Location: CPB-office, Van Stolkweg 14, The Hague

Presentation: Adriaan Soetevent (RuG)

Discussant: Remco van Eijkel (CPB)

Language: English

Registration:  Please register here.

Abstract subject:
Commercial firms are increasingly tying the sales of their products with donations to a charitable cause. Apart from a charitable motive, offering these hybrid bundles could be a strategic instrument for firms to increase profits. This paper addresses the latter perspective by investigating whether tying the sales of products to donations to charity increases profits net of the donation, and which donation scheme is most profitable. The theoretical model shows that, given rational agents, complete markets, and absent transaction costs, selling hybrid bundles is not profitable, even not when accounting for consumer altruism. We expect, however, that offering bundles can become profit-increasing when consumers overestimate the part of the sales price donated to charity. Surprisingly, the experimental results indicate that donating a fixed amount rather than a percentage to charity seems to be the most profitable scheme.

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