The Market Consequences of Perceived Strategic Generosity: An Empirical Examination of NFT Charity Fundraisers

Abstract

Crypto donations now represent a significant fraction of charitable giving worldwide. Nonfungible token (NFT) charity fundraisers, which involve the sale of NFTs of artistic works with the proceeds donated to philanthropic causes, have emerged as a novel development in this space. A unique aspect of NFT charity fundraisers is the significant potential for donors to reap financial gains from the rising value of purchased NFTs. Questions may arise about donors' motivations in these charity fundraisers, potentially resulting in a negative social image. NFT charity fundraisers thus offer a unique opportunity to understand the economic consequences of a donor’s social image. We investigate these effects in the context of a large NFT charity fundraiser. We identify the causal effect of purchasing an NFT within the charity fundraiser on a donor’s later market outcomes by leveraging random variation in transaction processing times on the blockchain. Further, we demonstrate a clear pattern of heterogeneity based on an individual’s decision to relist (versus hold) the purchased charity NFTs (a sign of perceived strategic generosity) and based on an individual’s social exposure within the NFT marketplace. We show that charity-NFT ’re-listers' experience significant penalties in the market regarding the prices they can command for their other NFTs, particularly among those who are more socially exposed. Finally, we report the results of a scenario-based online experiment, which again support our findings, highlighting that the re-listing a charity NFT for sale at a profit leads others to perceive their initial donation as strategic generosity and reduces those others' willingness to purchase NFTs from the donor. Our study underscores the growing importance of digital visibility and traceability, features that characterize crypto-philanthropy, and online philanthropy more broadly.