Economics Assignment: Behavioral Economics and Charitable Giving

This assignment delves into the realm of behavioral economics, specifically examining the motivations and decision-making processes of donors in charitable contexts. The first part of the assignment explores the factors influencing individual giving, including personal connections to causes, the desire for recognition, and the impact of peer pressure. It analyzes the interplay of psychological and economic factors, drawing on research to illustrate how these elements shape donor behavior. The second part shifts focus to strategies for attracting donors, highlighting the importance of both economic and psychological aspects. It emphasizes the need for transparency, well-organized processes, and alignment between a brand's objectives and donor expectations to encourage charitable contributions. The assignment uses references to support the arguments and findings.

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Behavioral ECONOMICS ASSIGNMENT

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Contents
Question 1..................................................................................................................................3
Question 2..................................................................................................................................4
Reference....................................................................................................................................6

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Question 1
Behavioral economics is a vast sect and the branch of economics that deals with the decision
making and the preferences of the consumer. Spending money in charitable cause also comes
under the consumption that provides an outcome in terms of societal changes and social
welfare. Thus, the consumers are also assumed to be rational in case of spending money on
the charitable cause as well. Therefore, few of the behavioural approaches guides the
individual while selecting the charity and spending money on it.
Personal connection to a cause is one of the biggest reasons for contribution in the charity.
The people often get intrigued by the final outcome of the charity and then decide to spend on
that. Personally, the individual connection and outcome envisioning is the main boosting that
would drive me to spend money on the charitable donation. Tse and Alex Sing-Lam (210)
Stated that the image of a better society is in the head of each and every individual of the
world. However, there are some of the factors which also influence the decision of the donor.
Psychologically, the reputation and the image of the donor also come into play. The donation
in charity makes a generous image of the person and this often drives the decision of the
person. Personally, the recognition and the reputation of the image is an important factor
while donating the money for the charity. This is the same behavior which comes into play
when a consumer spends money on luxurious or limited edition goods. If everyone can afford
that the satisfaction of the consumer goes down. Likewise, the recognition is important that
drives the decision of the donor. Vásárhelyi, Zsóka and István Scheuring (35) found out that
when all the voters of an election were acknowledged the rate of the vote in the election was
low. The same case, when the election commission only recognized the effort of the voters
who went there and actually voted in the process, the voting rate increased. That means it is
the recognition and the reputation that also play a huge role.
Apart from that, peer pressure is another factor of the model that can intrigue me to donate in
the charitable cause. It has become a well-known verse that charitable donation is good for
the mental health of the donor (Machado-León and José Luis 47). Sometimes people are also
asked to donate and that peer pressure influences the decision making of the individual.
However, personally, among all the factors that influence the decision making of the donor, I
believe the final output and the recognition of the donation is something that would drive the
decision. I will use that approach for the donation as the final output is important to me and

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peer pressure never influences my decision (Ginja and Samuel 60). The influence on the
decision making through the peer pressure is not sustainable and hence I will not use this
approach for the decision making bearing the donation in a charitable cause.
Question 2
It is important for a company to attract donors in order to raise the fund. The cause and the
project need to be marketed well before it can raise funds for the outcome of the project.
There are two aspects which can help in attracting the donors. First and the foremost aspect is
the economic aspect which helps in deciding the expected fund for the project. in any
charitable project the size of the fund is important as the cause never directed at any
individual or a single family (Riahinia and Nosrat 263). It includes a lot of people who are
finding it tough without any external help and are not under any government scheme.
Therefore, economic aspects are divulged in order to attract more donors in the project.
Another major aspect that helps in attracting donor is the psychological aspect. The
psychological aspects work like wonder in attracting the donors for the charitable cause. As
discussed above the individuals are helpful in general and always want to make their
contribution that will help others. The awareness regarding how a small contribution can help
increases the fund by manifold and hence the brands use this technique to attract more
donations. After the donors are attracted through adequate strategies and policies, the
preferences are set that further attracts more donors in the process. Experts stated that the
individuals are more likely to spend money if the processes are well organized (Faulkner,
Margaret and Jenni Romaniuk 17). If a brand tries to raise fund for a serious societal issue but
lacks the basic organisation and the plan it would not be able to attract funds from the people.
The donors remain wary of how the funds are going to be used.
Apart from that, the purchase decision of the brand in line with the goal of the brand also
needs to match the imagination of the donors. If a brand is buying some irrelevant products
that will not contribute to the final result of the project the donors will lose interest and the
brand will not be able to raise fund for the cause. Therefore, brands always look to buy
products and the services that are in line with the objective of the cause. Additionally, the
transaction processes for the donation and buying the products for the projects also needs to
be kept in mind in order to attract a large pool of donors and hence huge funds for the
charitable cause. The transaction for the arrangements of the project needs to be transparent
and easy for the donors as well. Experts noted that transparency is an important factor that

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attracts the donors in a cause (Bennett and Roger 341). According to a study, when the
donors are allowed to spend directly for the needy they are much more likely than when the
money is sent to the brand and they take care of it (Stein, Sharon and Vanessa Oliveira de
Andreotti 230). Therefore, in order to attract donors, the brand must include the donors in the
process as well so that one of the factors, recognition pulls them for spending in the
charitable cause of the brand. In other words, the objective and the aims of the brand need to
be shared with the donors.

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Reference
Bennett, Roger. "Factors contributing to the early failure of small new charity start-ups."
Journal of Small Business and Enterprise Development 23.2 (2016): 333-348.
Faulkner, Margaret, and Jenni Romaniuk. "Supporters’ Perceptions of Benefits Delivered by
Different Charity Activities." Journal of Nonprofit & Public Sector Marketing (2018): 1-22.
Ginja, Samuel, et al. "Understanding active school travel through the Behavioural Ecological
Model." Health psychology review 12.1 (2018): 58-74.
Machado-León, José Luis, et al. "Socio-economic and driving experience factors affecting
drivers’ perceptions of traffic crash risk." Transportation research part F: traffic psychology
and behavior 37 (2016): 41-51.
Riahinia, Nosrat, et al. "Charity on the Web: An evaluation of an Iranian Charity
Organization Website." Library Herald 54.3 (2016): 261-276.
Stein, Sharon, and Vanessa Oliveira de Andreotti. "Cash, competition, or charity:
international students and the global imaginary." Higher Education 72.2 (2016): 225-239.
Tse, Alex Sing-Lam. Dynamic economic decision problems under behavioral preferences
and market imperfections. Diss. University of Warwick, 2016.
Vásárhelyi, Zsóka, and István Scheuring. "Behavioural specialization during the Neolithic--
An evolutionary model." Frontiers in Sociology 3 (2018): 35.