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Fundraising and optimal policy rules

  • Mungan, Murat
  • Baris, Yoruk

This paper develops a simple spatial model of fundraising, in which charities select a target population to solicit donations. First, we show that in a competitive charity market without any intervention, the number of charities in the market and/or the overall net funds raised by charities may be sub-optimal. Next, we analyze whether a social planner can prevent such shortcomings and show that a regulatory mechanism can be designed to achieve socially desirable outcomes. In contrast to the previous literature, our model does not necessarily produce monopoly as the optimal market structure. We show that if fixed costs associated with establishing charities are sufficiently low, then the optimal market structure is not a monopoly. Given the importance of the trade-off between the volume and variety of charitable services, we argue that this result may be of particular interest to policy makers.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 18312.

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Date of creation: 29 Nov 2009
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Handle: RePEc:pra:mprapa:18312
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  1. Khanna, Jyoti & Posnett, John & Sandler, Todd, 1995. "Charity donations in the UK: New evidence based on panel data," Journal of Public Economics, Elsevier, vol. 56(2), pages 257-272, February.
  2. Harbaugh, William T., 1998. "What do donations buy?: A model of philanthropy based on prestige and warm glow," Journal of Public Economics, Elsevier, vol. 67(2), pages 269-284, February.
  3. Romano, Richard & Yildirim, Huseyin, 2001. "Why charities announce donations: a positive perspective," Journal of Public Economics, Elsevier, vol. 81(3), pages 423-447, September.
  4. Bilodeau, Marc & Slivinski, Al, 1997. "Rival charities," Journal of Public Economics, Elsevier, vol. 66(3), pages 449-467, December.
  5. Okten, Cagla & Weisbrod, Burton A., 2000. "Determinants of donations in private nonprofit markets," Journal of Public Economics, Elsevier, vol. 75(2), pages 255-272, February.
  6. Vesterlund, Lise, 2003. "The informational value of sequential fundraising," Journal of Public Economics, Elsevier, vol. 87(3-4), pages 627-657, March.
  7. Bariş K. Yörük, 2006. "How Responsive are Charitable Donors to Requests to Give?," Boston College Working Papers in Economics 653, Boston College Department of Economics.
  8. James Andreoni & A. Abigail Payne, 2003. "Do Government Grants to Private Charities Crowd Out Giving or Fund-raising?," American Economic Review, American Economic Association, vol. 93(3), pages 792-812, June.
  9. Fisher, Franklin M, 1977. "On Donor Sovereignty and United Charities," American Economic Review, American Economic Association, vol. 67(4), pages 632-38, September.
  10. Vincent C.H. Chua & Chung Ming Wong, 2003. "The Role of United Charities in Fundraising: The Case of Singapore," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 74(3), pages 433-464, 09.
  11. Glazer, Amihai & Konrad, Kai A, 1996. "A Signaling Explanation for Charity," American Economic Review, American Economic Association, vol. 86(4), pages 1019-28, September.
  12. Duncan, Brian, 2002. " Pumpkin Pies and Public Goods: The Raffle Fundraising Strategy," Public Choice, Springer, vol. 111(1-2), pages 49-71, March.
  13. Nicholas Economides & Susan Rose-Ackerman, 1992. "Differentiated Public Goods: Privatization and Optimality," Working Papers 92-3, New York University, Leonard N. Stern School of Business, Department of Economics.
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