Fundraising and Optimal Policy Rules

Document Type

Article

Publication Date

7-2012

Journal Title

Journal of Public Economy Theory

ISSN

1467-9779

DOI

10.1111/j.1467-9779.2012.01555.x

Abstract

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 suboptimal. 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.

First Page

625

Last Page

652

Num Pages

28

Volume Number

14

Issue Number

4

Publisher

Wiley Periodicals, LLC

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