Swayed to donate

B. Venkatesh

Consider this. People come to your house and ask for some donation to a charity. You decide to donate Rs 500. They, however, insist that you should pay a minimum of Rs 1,000! You refuse. They politely turn down your money and leave. Is their decision rational?

One of our readers posed this question to us after his contribution was turned down by people from a charity institution. The answer lies in the objective of the people collecting the donation. Suppose they want to collect Rs 1,00,000. A minimum of Rs 1,000 from each person would mean that they would have to seek no more than 100 people.

But why not collect the occasional Rs 500 from some donors? If the institution accepts a donation of Rs 500, the likelihood of receiving Rs 1,000 from subsequent donors comes down.

Social conformity

Think about this. When someone comes to you for a donation, you peer into the donation book to see how much others have paid. And you pay more or less that amount. Why?

The reason is that we are swayed by the collective decision of other people. Behavioural psychologists call it social conformity. Solomon Asch, a social psychologist, conducted experiments in this area. He found that in a group-setting, an individual would suppress her own opinion and conform to the group view, even if the group was wrong! Asch found that individuals felt the strong need to fit into the group and not be ridiculed for carrying a different opinion. That led them to conform to the group.

With donations, social conformity has to do with us not wanting to be ridiculed by the society as being miserly. At the same time, we do not want to be extravagant, lest the charity turns out to be a hoax. That is why we are swayed into paying Rs 1,000 when the minimum amount in the donation book is Rs 1,000. Turning down a contribution of Rs 500 does not seem irrational in this context.

(The author is a self-styled investment psychologist. He can be reached at enhancek@gmail.com)

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