Charity auctions from an economic perspective — literature review

One of the most common means of raising funds is the charity auction. At charity auctions, money is collected for a good cause, and the products are purchased for private consumption — the bidders may achieve both public and private gains. The charitable nature of this type of auction makes them different from standard auctions. The paper aims to present the main characteristics of this fundraising strategy as well as make a comparison with other formats of raising money for a good cause, i.a. lotteries. Furthermore, the main differences between charity and non-charity auctions will be explained. The studies do not clearly demonstrate whether the charity auction is a more effective mechanism of raising funds than the lottery. However, there is evidence that both formats outperform voluntary contributions. From the perspective of charity organizations, the most effective charity auction format seems to be the all-pay auction. The studies have also revealed that revenues at charity auctions are higher than at standard auctions.

Charity Auctions on the Internet: An Exploratory Study

The purpose of this study is to explore the value of conducting auctions on-line as a method of raising funds for charity organizations. We review the relevant literature on auctions, in both on-line and live formats and find that there remain numerous unanswered questions for charities considering this funding mechanism. In this exploratory study we collect and compare bid and selling information from eBay’s standard and charity sites and conclude, surprisingly, that the auction clearing prices for comparable items are higher on the non-charity site. Keywords: CVSS, Centre for Voluntary Sector Studies, Working Paper Series,TRSM, Ted Rogers School of Management Citation:

A Study of Bidding Behavior in Voluntary-Pay Philanthropic Auctions

The authors investigate compliance behavior and revenue implications in winner-pay and voluntary-pay auctions in charity and noncharity settings. In the voluntary-pay format, the seller asks all bidders to pay their own high bid. The authors explore motives and boundary conditions for compliance behavior based on internal and external triggers of social norms. The voluntary-pay format generates higher revenue than the winner-pay format for charity auctions, despite imperfect compliance, but it generates lower revenues in noncharity settings. To characterize bidding strategy, the authors study time to bid, auction choice, and jump bidding and find evidence that bidders in voluntary-pay auctions more commonly use jump bidding and late entry. The findings have important implications for marketing managers, augmenting the growing stream of empirical auction studies and work on corporate social responsibility. Specifically, combining an auction with a charitable cause may result in increased revenues, but managers should ensure that they are accounting for differential compliance rates between auction formats. Even if low-compliance bidders can be identified and screened out, doing so is not advantageous, because noncompliant bidders bid up prices.

A Greater Price for a Greater Good? Evidence that Consumers Pay More for Charity-Linked Products

To study whether consumers will pay more for products that generate charitable donations, we analyze data from eBay on charity and noncharity auctions of otherwise identical products. Charity prices are 6 percent higher, on average, than noncharity prices. Bids below the closing price are also higher, as are bids by individuals bidding on identical charity and noncharity products. Bidders appear to value charity revenue at least partially as a public good, as they submit bids earlier in charity auctions, stimulating other bidders to bid more aggressively. Our results help explain why firms may pledge charitable donations, green production, or similar activities. (JEL D12, D44, D64, L81, M14, M31)