A Decision Analysis Tool for Evaluating Fundraising Tiers
Decision Analysis, Vol. 6, No. 1, pp. 4-13, March 2009
Posted: 24 Oct 2008 Last revised: 28 Apr 2009
Date Written: March 2009
This paper presents a utility function model of donors who need to determine their donation to a charity organization that structures and publishes donations by tiers. By considering the prestige associated with each tier level, our analysis suggests that a tiered scheme generates an incentive for donors to raise their donation to the next tier when the originally intended donation is close to the minimum amount for the next tier level. In addition, we develop a decision analysis tool to illustrate how a charity can evaluate the effectiveness of different tier structures. Using publicly available federal tax return data and actual donations to a private high school, we present a method to estimate the model parameters. By taking other non-quantifiable factors into consideration, our tool can guide a charitable organization to determine an effective fundraising tier strategy.
Keywords: Cobb-Douglas Utility, Public Policy, Optimization, Decision Analysis
JEL Classification: C44
Suggested Citation: Suggested Citation