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A Theory of Charitable Fund-Raising with Costly Solicitations

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  • Alvaro Name Correa
  • Huseyin Yildirim
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    Abstract

    We present a theory of charitable fund-raising in which it is costly to solicit donors. We fully characterize the optimal solicitation strategy that maximizes donations net of fundraising costs. The optimal strategy dictates that the fund-raiser target only those individuals whose equilibrium contributions exceed their solicitation costs. We show that as the income inequality increases, so does the level of the public good, despite a non-monotonic fund-raising effort. This implies that costly fund-raising can provide a novel explanation for the non-neutrality of income redistributions and government grants often found in empirical studies. We also show that in large economies, only the "most willing" donors are solicited; and the average donation converges to the solicitation cost of these donors, which is strictly positive.

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    Bibliographic Info

    Paper provided by Duke University, Department of Economics in its series Working Papers with number 11-08.

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    Length: 32
    Date of creation: 2011
    Date of revision:
    Handle: RePEc:duk:dukeec:11-08

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    Postal: Department of Economics Duke University 213 Social Sciences Building Box 90097 Durham, NC 27708-0097
    Phone: (919) 660-1800
    Fax: (919) 684-8974
    Web page: http://econ.duke.edu/

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    Keywords: fund-raising; solicitation cost; charitable giving;

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