A Theory of Charitable Fund-Raising with Costly Solicitations

32 Pages Posted: 3 Jun 2011

See all articles by Huseyin Yildirim

Huseyin Yildirim

Duke University - Department of Economics

Alvaro Name Correa

Universidad Carlos III de Madrid

Date Written: May 27, 2011

Abstract

We present a theory of charitable fund-raising in which it is costly to solicit donors. We fully characterize the optimal solicitation strategy that maximizes donations net of fundraising costs. The optimal strategy dictates that the fund-raiser target only those individuals whose equilibrium contributions exceed their solicitation costs. We show that as the income inequality increases, so does the level of the public good, despite a non-monotonic fund-raising effort. This implies that costly fund-raising can provide a novel explanation for the non-neutrality of income redistributions and government grants often found in empirical studies. We also show that in large economies, only the "most willing" donors are solicited; and the average donation converges to the solicitation cost of these donors, which is strictly positive.

Keywords: fund-raising, solicitation cost, charitable giving

JEL Classification: H00, H30, H50

Suggested Citation

Yildirim, Huseyin and Name Correa, Alvaro, A Theory of Charitable Fund-Raising with Costly Solicitations (May 27, 2011). Economic Research Initiatives at Duke (ERID) Working Paper No. 99. Available at SSRN: https://ssrn.com/abstract=1857104

Huseyin Yildirim (Contact Author)

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States
919-660-1805 (Phone)
919-684-8974 (Fax)

Alvaro Name Correa

Universidad Carlos III de Madrid ( email )

CL. de Madrid 126
Madrid, Madrid 28903
Spain

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