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How does the number of options impact donation behavior?

How does the number of options impact donation behavior?

The number of options not only affect the size but also distribution of donations.

Imagine that 3 NGOs approach you. They are asking for your donation. One of them is UNICEF, the other OXFAM, and the third MERCY CORPS. All three promise to help children in need.

Source: Soyer, E., & Hogarth, R. M. (2011). The size and distribution of donations: Effects of number of recipients. Judgment and Decision Making, 6, 616-628.

What do you do? Do you donate? If yes, how much? And how would you distribute your total donation among them?

Now consider that, instead of 3, there are 8 of them on your doorstep. How might this change the way you think about the situation? Do you think people would be willing to donate more if there are more NGOs? What if there were 16 of them?

Through two field experiments conducted on the general public in Spain, Soyer of Özyeğin University, İstanbul and Hogarth of Universitat Pompeu Fabra, Barcelona, looked at how people’s donation decisions are affected by the number of choices available to them. This study contributes to the understanding of the much-discussed concept of choice overload: the potential negative effects of too many options on decisions. They are the first ones to test this phenomenon in the context of charitable giving and altruistic behavior.

The research generates three main insights:

1. Donations tend to increase (at a decreasing rate) with the number of available options: more people donate more money on the average.

This was because (i) more options give people the sensation that there is indeed much need for aid; and (ii) people could distribute their contributions across different options. This second reason is crucial. It turns out, more choice is potentially paralyzing because people have to choose among many alternatives. In donation decision, they didn’t have to; they could distribute among them.

2. How people distribute their donations depends on the number of options.

Specifically, when there are few options, donors tend to distribute them more evenly. When there are many options, on the other hand, they tend to give most (or all) of the money to the option they easily recognize. Hence, competition favors the famous.

3. Finally, these results hold for the campaigns offered by a single NGO.

Hence, the more the available campaigns, the more contributions on the average. However, there is one exception. If the NGO uses a drop-down menu, which constrains the donor to make a selection among the alternatives (taking away the ability to distribute among them), more options may actually hurt donations. Hence, NGOs would be better off to providing many options, and allow the potential donors to freely distribute their contributions among them.