Notes

Overhead Aversion

April 2, 2023

In their 2014 paper, “Avoiding overhead aversion in charity”, economic researchers, Ayelet Gneezy, Elizabeth Keenan, and Uri Gneezy observed that people are usually hesitant to donate to charities that spend too much on admin costs (e.g., staff salaries, supplies, utilities, etc.). They called this phenomenon overhead aversion. But charities that don’t spend money on these overhead costs will not have the infrastructure in place to meet their goals. Thus, these researchers conducted a study to find out the contexts where overhead costs won’t prevent people from donating to charities. In their study, they sent a donation request on behalf of a charitable organization to 40000 potential donors in the US. One group of potential donors were told that the charity had already received $10,000 from a private donor; another group was told that every dollar donated up to $10000 would be matched; a third group was told that the charity had already received $10000 from a private donor that would be used specifically for overhead and administrative costs; the final group were simply asked to donate. Ayelet and her collaborators found that the third group - the one where donors were told that a private donor had covered overhead costs - made the largest donation!

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