Governments and companies often reach for financial penalties when they want people to change their behavior. Peak-hour subway surcharges, plastic bag fees, and disposable cup charges are all built on the same logic: make an undesirable choice sting a little, and people will pick a better alternative. But these charges frequently attract public suspicion. If the agency collecting the money also keeps it, the whole thing can start to look less like a nudge and more like a revenue grab.
An intuitive fix has emerged in recent years: donate the proceeds to charity. In the UK, plastic bag fees are directed to charitable causes. Starbucks has sent proceeds from its disposable cup surcharge to sustainability programs. But does turning a surcharge into a donation actually preserve its power to shift behavior? A new study in the Journal of the Academy of Marketing Science suggests the answer is complicated, and the design choice hidden inside the donation matters a lot.
The paradox at the heart of “charitable” surcharges
Catherine Yeung of the Chinese University of Hong Kong, Xiuping Li of the National University of Singapore, and colleagues set out to test what happens when a surcharge is paired with a donation. They identify two forces pulling in opposite directions.
The first is what behavioral economists call the “pain of paying.” Surcharges work in part because handing over money feels bad. But if the money is going to a good cause, that sting is dulled. A commuter tempted to keep sleeping in and take the crowded morning train can now tell herself the extra fare is really a charitable contribution. The penalty has been rebranded, in her mind, as a virtuous act.
The second force pulls the other way. When an agency keeps the money it collects, people may suspect the policy is really about profits. Donating the proceeds removes that suspicion and can boost what the researchers call “policy endorsement,” meaning people are more likely to buy into the policy’s stated goal and align their behavior with it.
The question is which force wins. The researchers wanted to know whether donating a surcharge nets out as a gain or a loss for behavior change, and whether the design of the donation itself changes the answer.
Three studies, three settings
The team ran three studies comparing three surcharge configurations: a standard non-donated surcharge kept by the enforcer, a donation surcharge in which proceeds went to a charity picked by the enforcer, and a donation surcharge in which the payer chose the charity from a list.
Study 1 was an online survey of 749 participants who were told about a hypothetical penalty for inattentive survey responses. Participants rated how painful the penalty would feel and how much they endorsed it. The results confirmed both hypothesized forces. Donation conditions reduced the reported pain of paying compared to the non-donated version, whether or not participants got to choose the charity. And when participants could choose the beneficiary, they reported the strongest endorsement of the policy’s goals.
When asked how they would respond to the penalty, participants in both donation conditions said they would try to be more attentive than participants in the non-donated condition. In a hypothetical scenario, in other words, adding a charity to a surcharge looked like a win.
What happens when real money is on the line
Study 2 moved from a survey to an in-person lab experiment where 182 university students faced actual monetary deductions for inattentive answers. Participants were given the equivalent of about $3.80 and told that each failed attention check would cost them about 38 cents. They then completed an attention task with ten questions.
The pattern flipped. Participants in the non-donated surcharge condition answered an average of 7.08 questions correctly. Those in the donation-without-choice condition performed the worst, answering just 6.33 correctly, a statistically significant drop. Participants who chose their own charity bounced back to 7.50 correct answers, effectively matching the non-donated group.
In other words, once people actually had to exert effort to avoid the penalty, the pain-reducing effect of the donation dominated, and behavior change collapsed. Letting people pick the charity restored the surcharge’s bite.
A real-world test on the subway
The centerpiece of the paper is a large field experiment run in partnership with a subway regulator in an Asian city where overcrowding during rush hour was causing frequent breakdowns. The researchers recruited 1,047 regular commuters through newspaper ads and station flyers, then randomly assigned each to one of four groups: a no-surcharge control, a non-donated surcharge, a donation-without-choice surcharge, and a donation-with-choice surcharge.
The surcharge was set at roughly 35 cents per peak-hour trip, defined as trips exiting stations between 8:15 and 9:15 a.m. on weekdays. That amount represented about 35% of the average fare. The researchers tracked each commuter’s actual trips using smart-card data over a four-week baseline, a six-week intervention period, and a four-week post-intervention period.
The results largely mirrored the lab findings. Compared to the control group, the non-donated surcharge reduced the odds of peak-hour travel by about 34.7%. The donation-without-choice surcharge reduced those odds by only 14.7%, less than half as effective. And the donation-with-choice condition reduced the odds by 27.2%, recovering roughly 85% of the deterrent power of the standard surcharge.
Statistical tests confirmed that a donated-without-choice surcharge produced significantly more peak-hour travel than the non-donated version, while giving commuters the ability to pick a beneficiary brought the effect close, though not quite equal, to the plain surcharge.
Why intentions and actions diverged
One notable feature of the results is the gap between what people said they would do in the online survey and what they actually did in the lab and the field. The researchers point to a distinction between “cold” and “hot” states. When people imagine paying a surcharge in the abstract, they focus on symbolism, and endorsing a good cause feels motivating. But when they actually have to drag themselves out of bed earlier or concentrate through a tedious task, the donation provides a ready-made excuse to skip the effort.
That gap has implications beyond this specific policy question. The authors argue that behavioral interventions involving charitable framing may look promising in surveys and fall short when tested in realistic settings, and they recommend field testing before implementation.
Practical takeaways and caveats
For managers and policymakers, the study points to a specific design lesson. Donating surcharge proceeds may soften public backlash, but doing so with a pre-selected charity can gut the policy’s ability to change behavior. If donation is going to happen, offering payers a menu of beneficiaries preserves most of the deterrent effect while still removing the appearance of profit-seeking.
The researchers also note a wrinkle worth flagging: because donated surcharges lead to more peak-hour trips, commuters as a group actually pay more in total surcharges under a donation policy than under a standard one. For companies serving lower-income customers, that could increase financial strain in ways the donation framing might obscure.
The study has limits. The field experiment took place in a single city with a specific transit system and a specific set of five charity options, and the researchers note they couldn’t fully observe what commuters did instead of riding at peak hours, whether shifting their commute, switching modes, or simply not traveling. The psychological mechanism behind the choice effect, whether it works through a sense of control, greater engagement, or shifting perspective toward the policymaker’s viewpoint, remains an open question for follow-up work.
