Information, Competition, and the Quality of Charities
32 Pages Posted: 19 May 2015
Date Written: May 16, 2015
We propose a model of charity competition in which informed giving alone can explain quality heterogeneity across similar charities. It is this heterogeneity that also creates the demand for information. In equilibrium, too few donors pay to be informed; but interestingly, informed giving may increase with the cost of information. This is true if the charitable market is highly competitive or if private consumption is a strong substitute to giving -- both of which are supported by evidence.
Keywords: informed giving, quality of charity, competition, all-pay auctions
JEL Classification: H00, H30, H50
Suggested Citation: Suggested Citation