Impact of Social Risk Aversion and Audience Effects on Generosity to the Poor

This paper seeks to contribute to our understanding of audience effects and another effect called social risk aversion. I conduct dictator games in a panel design to collect between- subject and within-subject comparisons. My experiment modifies Christina Fong and Felix Oberholzer-Gee’s prior experimental design in order to better identify how the two separate phenomena of social risk aversion and audience effects work to alter donors’ decisions, especially when they are given the option to purchase information about the welfare recipient. Results show that giving decreases when donors decide not to buy information about recipients in the first period, but bounces back up if they make this decision in later periods. Social risk aversion is unable to explain this observation; however, a plausible explanation is that the audience effect is weakened during the first period but remains strong during later periods. Understanding these motivations behind people’s decision to donate is important because this information allows governments and non-governmental organizations to better structure transfer programs.