Does What You Have Affect What You Give?
The percentage of money you give away depends on where you start.
Posted March 15, 2019
Does the amount of money someone has at a given time affect their generosity? At some level, it has to. The more money you have, the larger the amount you have available to give to someone else (or to charity). But as the amount of money you have gets larger, the easier it is for even a small percentage of that money to seem like a significant gift. So the more money someone has, the more likely they might be to give a smaller proportion of that money away.
Unfortunately, it can be hard to study giving behavior in the real world. There are many factors that affect whether someone gives to charity, and it would be hard to disentangle these various factors in a good study.
Instead, psychologists have used tasks developed by game theorists to try to study what people will give to others. Two tasks in particular have been the subject of a lot of attention: the ultimatum game and the dictator game.
The ultimatum game explores issues of fairness. There are two players. One player—the giver—gets some money (say, $10) and is told that they can split the money any way they want with the other player (called the receiver). The receiver has two options. They can accept the offer, in which case they get the split proposed by the giver. They can also reject the offer, in which case nobody gets any money at all.
Economists say that a rational receiver will accept any non-zero offer because they are economically better off if they accept even a small amount of money than they would be if they get nothing. In fact, receivers typically reject offers that split the money very unevenly. They might take a 60/40 split but are unlikely to take an 80/20 split. Givers are sensitive to the likelihood that unfair offers are likely to be rejected, so they tend to offer splits between 30% and 50% of the amount they were given initially.
The dictator game is slightly different. In this one, the giver gets an initial amount of money and offers a split to the receiver, and that amount is then split between them. There is no opportunity for the receiver to reject offers. In this case, dictators typically still give some money to the receiver. This game is more similar to charitable giving because the giver has an opportunity to share with the receiver, though they could choose to keep the entire amount.
In the dictator game, givers generally still split the money and give some of it to the receiver. However, the overall amount that dictators give is generally lower than in the ultimatum game.
One question that studies have explored is whether the size of the initial stake influences how much people give. You could imagine that when people have a lot of money, they feel more generous, so they give a higher proportion of what they have to others. On the other hand, if people have a lot of money, then they can give what feels like a large amount to someone else even if it is a small percentage of what they have.
For example, a person with $10 might give $4 to someone else, because the amount is small, but it is a substantial percentage of the total amount. A person with $1,000 might give $100, which is a big sum of money, but a smaller percentage of what they have overall.
A paper by Andrea Larney, Amanda Rotella, and Pat Barclay in a 2019 issue of Organizational Behavior and Human Decision Processes did a meta-analysis of several studies of the ultimatum and dictator games that varied the size of the stakes. A meta-analysis looks across many published studies to find the general trend.
This study found that the size of the initial amount of money that the giver gets does not influence the proportion of that stake they offer to the receiver. Basically, when people think that there is some chance their offer will be rejected, they focus on the percentage of the total amount they give.
In contrast, for the dictator game, the percentage of the total amount the giver offers to the receiver gets smaller as the size of the initial stake gets larger. The larger the initial stake, the bigger this effect gets. So it appears that for small amounts, dictators are focused on appearing to give a reasonable percentage of the money. For larger amounts, they are more focused on whether the amount of money looks reasonable.
This result fits with other observations that poorer households tend to donate a larger percentage of their income than wealthier households, though wealthier households donate more money overall.
Larney, A., Rotella, A., & Barclay, P. (2019). Stake size effects in ultimatum game and dictator game offers: A meta-analysis. Organizational Behavior and Human Decision Processes, 151, 61-72.