Applications of Behavioral Economics in Philanthropy: Understanding Loss Aversion and Risk Tolerance in Grantmaking

Abstract

This paper considers how individuals incorporate in philanthropy unavoidable considerations of loss and risk in decisions which are made under conditions of uncertainty, albeit tested by means of a "laboratory" experiment employing hypotheticals based on grant?making choices. Are natural and fundamental behavioral patterns exhibited in personal decision?making carried over into decisions made in the philanthropic context, or do new behaviors emerge when one moves from personal choices to philanthropic ones