It is clear from simple introspection that moral and social considerations affect the incentives and decisions of individuals. Cognizant of this, the literature in experimental economics has carefully designed experiments to suppress these effects in order to focus on the purely economic incentives. This is an important and justifiable methodological strategy. It is now time to move to the next stage in experimental research. The purpose of this study is to develop a methodology for understanding how these moral and social considerations shape actual economic interactions, how informal mechanisms arise to take advantage of these moral and social forces, and how we can deliberately design institutions to use moral and social concerns to the greatest economic advantage.
There are two components to this study. Part 1 focuses on experimental economics. Gateway experiments are developed, establishing the existence and nature of particular effects. Overall, the objective is to establish new areas of inquiry into how real economic interactions are structured and maintained in a competitive market.
Part 2 of the study looks at real world data relating to charitable giving. Here again the focus is on the institutional design: for example, how fundraising institutions react to government grants. The model of a representative fundraiser's behavior developed in this study reveals a new perspective on how donations respond to government grants.
Broader Impacts: This model will be used to answer questions such as: How much do charities reduce fundraising after a grant? Are lost donations actually crowded out or simply displaced to other charities? The results of this study are expected significantly to alter the discussion of the crowding out hypothesis.
