There are Free Lunches Statement of Intentions

There are Free Lunches: Behavioral Clues to Live Happy in the Economic World is a blog that intends to present updated and relevant information about the "hidden" and only recently uncovered dimensions of the economic science: the behavioral factors. With this blog we intend to promote in Europe and in the rest of the World, the top research articles and perspectives on behavioral economics, decision making, consumer behavior, and general behavioral science. We aim to be followed by journalists, academics, managers, civil servants, and everyone who wishes to improve their daily interaction with the economic world and consequently, their lives' happiness.

Sunday, 10 July 2011

Pay-What-You-Want Pricing and Charitable Giving (Via Stanford Center for Social Innovation)

In this quarter’s column, we explore “shared social responsibility” — the idea of companies working in tandem with charities and customers to support socially beneficial causes.

One way this can work is illuminated in a recent study co-authored by Leif Nelson, an associate professor of marketing at the Haas School of Business at UC Berkeley. Nelson and his colleagues have shown that when customers are allowed to pay what they want for a purchase, and — this is key — when they simultaneously know a portion of their money will go to a specific charity, they offer substantially more than they would without the involvement of the charity.

It turns out that just offering a product at a fixed price and telling customers that a certain percentage of their purchase will go to the charity doesn’t stimulate as many sales — and therefore doesn’t raise as much money as hoped. Yet this is the most common charitable promotion consumers see.

Interestingly, the study reveals that letting people pay what they want, combined with a promise that some will go to charity, produces even more profit than selling them a product at a regular, fixed price — whether that price has a charity offer attached to it or not. It also produces a surplus that can go to the charity itself. This type of co-participatory pricing scheme, then, is an ingenious way of stimulating both philanthropic giving and increased sales — a win-win for everyone.

If you have 5 minutesyou can check this insigth to the "honest bar" phenomena here:

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