When donating to charities, people expect their money to be spent wisely. However, since donors are not the recipients of final goods and services, they cannot easily assess their quality. Several certifying agencies award quality certificates to charities based on a set of known criteria. A recent working paper by Maja Adena (BCCP fellow), Julian Harke, and others studies experimentally to what extent such a certificate for a charity is perceived as signal of quality.
To study the impact of quality certificates on donations to a charity, we worked with a real local charity. We compared the amounts donated by participants who were presented with a standard solicitation letter versus a letter that additionally informed that the charity has received a quality certificate (DZI Spendensiegel). Participants who were informed about the certificate donated on average 10% more than participants who received the letter without the certificate.
In a second step, we additionally informed half of the participants about the fees that a charity has to pay to the certifying agency for the certificate. In light of this information, the participants could revise their decision to give. We expected that people who read the information about the fee for the certificate could interpret the reported expenses as a “diversion of resources” from the actual cause and thus, indicate lower donations on average than do participants who do not receive information about the costs. We observed, however, only a small decrease that was not significant.
In a survey following the experiment, we found that a certificate increases trust in a charity, and that there is a positive correlation between trust and donations. We also present some preliminary evidence pointing to the causal role of trust for donation probability.
The relevance of the topic goes beyond the nonprofit sector since the results likely carry over to other goods and services whose quality is not easy for customers to assess, and where the relationship between the seller and buyer has to be trust-based.
The full paper “Quality certifications for nonprofits, charitable giving, and donor's trust: experimental evidence” has been published as WZB Discussion Paper SP II 2017–302.