Fundraising and Optimal Policy Rules
Murat C. Mungan
Florida State University - College of Law
Barış K Yörük
Boston College - Department of Economics
14 Journal of Public Economic Theory, 625 (2012).
This paper develops a simple spatial model of fund-raising, 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.
Number of Pages in PDF File: 30
Keywords: Fundraising, Regulatory Policy
JEL Classification: H21, L31, L38Accepted Paper Series
Date posted: April 6, 2011 ; Last revised: August 8, 2012
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