The informational value of sequential fundraising

Abstract

This paper examines a puzzling inconsistency between the theoretical prediction of private provisions to public goods and actual fundraising behavior. While fundraisers often choose to announce past contributions, economic theory predicts that contributions will be largest when donors are uninformed of the contributions made by others. This paper suggests that an announcement strategy may be optimal because it helps reveal the charity's quality. It is shown that when there is imperfect information about the value of the public good and contributors can purchase information regarding its quality, then there exist equilibria in which an announcement strategy is optimal. Interestingly, in equilibrium a high-quality charity receives contributions that exceed those that would result had the quality of the charity been common knowledge. Hence, an announcement strategy not only helps worthwhile organizations reveal their type, but it also helps the fundraiser reduce the free-rider problem. 

Andreoni–McGuire algorithm and the limits of warm-glow giving

“…Perhaps an equally important source of informational asymmetry is that individuals are unsure about the quality of the charity, and a government grant can provide a valuable signal -a point first made by Vesterlund (2003). 16 This signaling probably works best in settings where donors evaluate the charity's qualifications similarly; that is, they at least agree on what constitutes a "good" charity.…”

Does team competition increase pro-social lending? Evidence from online microfinance

“…While our theoretical framework is closely related to the literature on sequential contributions to public goods (Varian, 1994;Vesterlund, 2003;Andreoni, 2006a) and charitable giving in the field (Shang and Croson, 2009;List, 2011;Kessler, 2013), we also incorporate features of online microfinance into our model to better represent the Kiva context.…”

A theory of outsourced fundraising: Why dollars turn into “Pennies for Charity”

“…Apart from the papers mentioned above, our paper relates to a growing theoretical literature on strategic fund-raising by means of: providing prestige and status to donors (Glazer and Konrad, 1996;Harbaugh 1998;Romano and Yildirim, 2001; Barbieri and Malueg, 2014); coordinating donations (Andreoni, 1998;Marx and Matthews, 2000); facilitating informed giving (Vesterlund, 2003;Andreoni 2006;Krasteva and Yildirim, 2013); and organizing lotteries (Morgan, 2000). These papers, however, do not model fundraising as an endogenous, costly undertaking.…”