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Prompted to Be Good: The Impact of Certification on the Quality of Charities

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  • Katarina Svitkova

Abstract

In this study we model how certification affects managers’ choice of the quality of the nonprofit organizations they run. We analyze a market with one representative charity, run by a manager with some preference for the provision of a charitable good, one donor, and a certification agency. We assume that the nature of the charitable good does not allow for partial provision, thus, the charity can be of two types only: a good charity that spends all its resources on the charitable good, and a bad one that diverts all its resources for the private consumption of its manager (for-profit in disguise). We show that for a wide parameter range, the presence of an honest 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.

Suggested Citation

  • Katarina Svitkova, 2007. "Prompted to Be Good: The Impact of Certification on the Quality of Charities," CERGE-EI Working Papers wp320, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    • Handle: RePEc:cer:papers:wp320
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    References listed on IDEAS

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    1. George A. Akerlof, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 97(4), pages 543-569.
    2. Katarina Svitkova & Andreas Ortmann, 2006. "Certification as a Viable Quality Assurance Mechanism: Theory and Suggestive Evidence," CERGE-EI Working Papers wp288, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
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    Cited by:

    1. Mary Gugerty, 2009. "Signaling virtue: voluntary accountability programs among nonprofit organizations," Policy Sciences, Springer;Society of Policy Sciences, vol. 42(3), pages 243-273, August.

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    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory

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