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Seeds to succeed?

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  • Bracha, Anat
  • Menietti, Michael
  • Vesterlund, Lise
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    Abstract

    The public phase of a capital campaign is typically launched with the announcement of a large seed donation. Andreoni (1998) argues that such a fundraising strategy may be particularly effective when funds are being raised for projects that have fixed production costs. The reason is that when there are fixed costs of production simultaneous giving may result in both positive and zero provision equilibria. Thus absent announcements donors may get stuck in an equilibrium that fails to provide a desirable public project. Andreoni (1998) demonstrates that such inferior outcomes can be eliminated when the fundraiser initially secures a sufficiently large seed donation. We investigate this model experimentally to determine whether announcements of seed money eliminate the inefficiencies that may result under fixed costs and simultaneous provision. To assess the strength of the theory we examine the effect of announcements in both the presence and absence of fixed costs. Our findings are supportive of the theory for sufficiently high fixed costs.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Public Economics.

    Volume (Year): 95 (2011)
    Issue (Month): 5 ()
    Pages: 416-427

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    Handle: RePEc:eee:pubeco:v:95:y:2011:i:5:p:416-427

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    Web page: http://www.elsevier.com/locate/inca/505578

    Related research

    Keywords: Fundraising; Seed money; Sequential giving; Charitable giving; Coordination; Public goods;

    References

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    19. James Andreoni & William Harbaugh & Lise Vesterlund, 2003. "The Carrot or the Stick: Rewards, Punishments, and Cooperation," American Economic Review, American Economic Association, vol. 93(3), pages 893-902, June.
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