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Charitable giving and intermediation: a principal agent problem with hidden prices

Author

Listed:
  • Nadine Chlaß

    (Department of Economics, Friedrich Schiller University Jena, Germany.)

  • Lata Gangadharan

    (Department of Economics, Monash University,)

  • Kristy Jones

    (Senior Economist, Australian Council of Trade Unions Behavioural Insights Team, Queensland,)

Abstract

Donations are often made through charitable intermediaries that can fund themselves from these same donations. After intermediation, only a fraction of the amount donated may reach the intended beneficiary. The price of charitable output is therefore higher after intermediation than if donors donated directly toward the end cause. At the same time, this price is hidden from donors since they cannot verify how much intermediaries pass on. We show that while donors reduce their donation in intermediation itself and also reduce their donation because they expect the price of charitable output to increase, both reactions are either fully or partly compensated by their ethical preferences for the recipient’s rights. Charitable output, therefore, can be a Giffen-good.

Suggested Citation

  • Nadine Chlaß & Lata Gangadharan & Kristy Jones, 2021. "Charitable giving and intermediation: a principal agent problem with hidden prices," Monash Economics Working Papers 2021-14, Monash University, Department of Economics.
    • Handle: RePEc:mos:moswps:2021-14
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    References listed on IDEAS

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    Cited by:

    1. Adena, Maja & Huck, Steffen, 2022. "Personalized fundraising: A field experiment on threshold matching of donations," Journal of Economic Behavior & Organization, Elsevier, vol. 200(C), pages 1-20.
    2. Maja Adena & Steffen Huck, 2022. "Voluntary ‘donations’ versus reward-oriented ‘contributions’: two experiments on framing in funding mechanisms," Experimental Economics, Springer;Economic Science Association, vol. 25(5), pages 1399-1417, November.

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    More about this item

    Keywords

    charitable giving; altruism; intermediation; charitable institutions; moral judgment reasoning; experiment;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship

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