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A Signaling Explanation for Charity

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  • Glazer, Amihai
  • Konrad, Kai A

Abstract

The standard model of voluntary provision of public goods considers utility to be a function u = u (x, G) of consumption of a private good x and of the sum of contributions to a public good G. Recent theoretical analyses derive the following properties of the Nash equilibrium. 1) In large economies only the very rich contribute to the public good (James Andreoni, 1988; Timothy L. Fries et al., 1991); the share of contributions in total income is negligible. 2) Governmental supply of the public good crowds out private supply. If all individuals donate in the original equilibrium this crowding out is complete (Peter G. Warr, 1982; B. Douglas Bernheim, 1986; Theodore C. Bergstrom et al., 1986).
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  • Glazer, Amihai & Konrad, Kai A, 1996. "A Signaling Explanation for Charity," American Economic Review, American Economic Association, vol. 86(4), pages 1019-1028, September.
    • Handle: RePEc:aea:aecrev:v:86:y:1996:i:4:p:1019-28
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