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Certification and Its Impact on Quality of Charities

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  • Katarína Svítková
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    Abstract

    Nonprofit organizations in transition countries experience low trust and consequently low income from donations. The study introduces one particular solution to the problem, ¨ certification, and examines its impact on the quality of the nonprofit organizations in the market. The situation is illustrated in a game theoretical model, with a manager, donor, certifier, and the charity providing a charitable good: for simplicity, charity is either good or bad: A good charity spends all the resources on the charitable good, and a bad one diverts all resources to the private consumption of its manager (for-profit in disguise). We show that for a wide parameter range and for two different disclosure rules, the presence of a certifier in the market increases the incentives for managers to choose good charities, leading to an improvement in the market as the share of good charities increases.

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    Bibliographic Info

    Article provided by University of Economics, Prague in its journal Prague Economic Papers.

    Volume (Year): 2013 (2013)
    Issue (Month): 4 ()
    Pages: 542-557

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    Handle: RePEc:prg:jnlpep:v:2013:y:2013:i:4:id:467:p:542-557

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    Related research

    Keywords: quality assurance; non-profit organizations; fundraising; certification;

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