Brothers in Alms? Coordination Betwen Nonprofits on Markets for Donations
Mission-driven nonprofit organizations compete for donations through fundraising activities. Such competition can lead to inefficient outcomes, if nonprofits impose externalities on each others' output. This paper studies the sustainability of fundraising coordination agreements, using a game-theoretic model of coalition formation. Three key characteristics determine the stability of cooperation: (i) the alliance formation rule, (ii) the extent to which fundraising efforts are strategic complements/substitutes, and (iii) whether deviation from the agreements is by an individual or by a group of nonprots. We also characterize necessary and su¢ cient conditions for the stability of Pareto-optimal full coordination in fundraising.
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