Round it up: Preference Exists for Rounded Totals (PERT)

In recent years, charitable giving has stagnated. In the US, on average individuals only donate about 2% of their annual disposable income, a level of contribution that has remained fairly constant across the past four decades (Giving USA 2017). Such charitable contributions are positive and admirable, of course, but there remains a considerable and untapped upside of potential contributions in donors’ mental budgets. We therefore present a simple method for nudging more people to donate more money to charities. Our main hypothesis builds from prior research showing that rounded numbers (e.g., $3.00) subjectively “feel right” (Wadhwa and Zhang 2015), and that people prefer offers with rounded prices (Yan and Pena-Marin 2017). We investigate charitable donations that, when added to the price of a product, sum to a rounded total i.e. for example, when purchasing a product for $7.60, might people be more willing to donate an additional $1.40 than $1.20? To the best of our knowledge, no research has investigated whether the roundness of the total amount affects donations, and if so, by what psychological process it operates. Moreover, although consumer researchers have revealed many important factors affecting charitable donations (e.g. Charness and Holder 2018; Koschate Fischer, Stefan and Hoyer 2012; Krishna 2011; Goswami and Urminsky 2016; Hagtvedt and Patrick 2016), no prior research has examined donation behavior in the context of add on to a purchase. Here we focus on the roundness of a total amount, hypothesizing that a preference exists for rounded totals (henceforth PERT effect). While rounded numbers could have positive effects, on the other hand, however, rounded numbers are also perceived to be bigger than nonrounded numbers (Thomas, Simon and Kadiyali 2010). This could lead consumers to feel that a rounded total is psychologically more costly than a comparable but nonrounded number. Thus, the presumed PERT effect is not a foregone conclusion; theoretically, the opposite effect could occur.