Conspicuous generosity

We develop a simple model of generous behavior. It is based on the premise that some people are generous, but everyone wants to appear generous—especially in the eyes of other generous people. Although non-monetary donations are always inefficient, they frequently occur in equilibrium because they facilitate signaling. The model helps to explain the prevalence of volunteering, the nature of Christmas gifts, and the taboo against paying cash in return for friendly favors. Finally, and perhaps most notably, the model explains why it is so common to ask for non-monetary favors and so uncommon to ask for money.

Research highlights► We develop a simple theoretical model of generous behavior. ► The model is based on the premise that some people are generous, but everyone wants to appear generous. ► Although non-monetary donations are always inefficient, they frequently occur in equilibrium because they facilitate signaling. ► The model helps to explain volunteering, the nature of Christmas gifts, and the taboo against paying cash in return for friendly favors. ► Finally, the model explains why it is so common to ask for non-monetary favors and so uncommon to ask for money.