Andreas Lange (University of Hamburg)
We provide theoretical and experimental insights into how the observability of donation decisions may affect the incentives to initially generate income: before donating, subjects can first choose to work in a “clean” or a “harmful” technology with the latter generating a larger personal income at the expense of imposing a negative externality. Our results put a word of caution to calls for a larger transparency of prosocial behaviors as information on donation decisions can backfire: more subjects choose the “harmful” technology and only partially compensate for this through an increase in donations. Additionally providing information on the technology choice induces subjects to switch to the “clean” technology but lowers their donations. In competitive environments, an increased share of subjects chooses the “harmful” technology, providing information again affects donation decisions, but has only minor and insignificant impacts on the total payoff to charity as other margins of behavior adjust.