Fundraising and Optimal Policy Rules
14 Journal of Public Economic Theory, 625 (2012).
30 Pages Posted: 6 Apr 2011 Last revised: 8 Aug 2012
Date Written: 2010
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.
Keywords: Fundraising, Regulatory Policy
JEL Classification: H21, L31, L38
Suggested Citation: Suggested Citation