A Greater Price for a Greater Good? The Charity Premium in Online Auctions. Working

Abstract: Will consumers pay higher prices for products linked to charitable causes? This question is relevant both to the strategies of for-profit firms and to the fund-raising efforts of non-profit organizations. To answer the question, we analyze a novel data set that matches identical products sold on eBay via charity and non-charity auctions. Items sold through charity auctions have prices that are 6 % higher, on average, than in non-charity auctions for matched products. The charity premium increases with the share of revenue donated and declines with the value of the item for sale. We develop a model of charity auction participation that is consistent with the observed positive charity premium that decreases with product value. We use data on bid timing to infer that the premium is due in part to bidders perceiving charity revenue as a public good. In charity auctions bidders submit their bids relatively early, and this induces other bidders to bid more aggressively