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Leadership Giving in Charitable Fund-Raising

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  • JAMES ANDREONI

Abstract

Why do charities often begin new capital fund drives by announcing a large contribution by a single wealthy donor? This paper explores the possibility that such "leadership giving" provides a signal to all other givers that the charity is of high quality. The dilemma is that if the lead giver can deceive others to believe the charity is of higher quality than it truly is, then these followers will make larger contributions, which will benefit the leader. Hence, the leader must give an unusually large amount to convey a credible signal of the quality. This sets up a war-of-attrition game for who will pay the cost to signal the quality. Since the wealthy have the lowest opportunity cost of providing the signal, they, in equilibrium, move first to provide the signal of quality with exceptionally large gifts. Copyright 2006 Blackwell Publishing Inc..

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Bibliographic Info

Article provided by Association for Public Economic Theory in its journal Journal of Public Economic Theory.

Volume (Year): 8 (2006)
Issue (Month): 1 (01)
Pages: 1-22

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Handle: RePEc:bla:jpbect:v:8:y:2006:i:1:p:1-22

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  1. A. Payne, 2001. "Measuring the Effect of Federal Research Funding on Private Donations at Research Universities: Is Federal Research Funding More than a Substitute for Private Donations?," International Tax and Public Finance, Springer, vol. 8(5), pages 731-751, November.
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  11. John List & David Lucking-Reiley, 2002. "The effects of seed money and refunds on charitable giving: Experimental evidence from a university capital campaign," Natural Field Experiments 00301, The Field Experiments Website.
  12. Bilodeau, M. & Slivinsky, A., 1994. "Toilet Cleaning and Department Chairing: Volunteering a public service," Cahiers de recherche 94-01, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke.
  13. Andreoni, James, 1990. "Impure Altruism and Donations to Public Goods: A Theory of Warm-Glow Giving?," Economic Journal, Royal Economic Society, vol. 100(401), pages 464-77, June.
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