A Note on the Theory of Charitable Fundraising: The Role of Refunds

Abstract

Andreoni (1998) shows that a small amount of seed money from the government can generate substantial additional private donations towards the provision of a public good, when there is a threshold level of provision below which no benefits are achieved. We argue that Andreoni's solution can be extended to a mechanism where refunds are possible. We then argue that a greater bang per buck may be achieved if the seed money is targeted to cover the administrative costs of providing refunds.

Keywords: Public Goods, Seed Money, Threshold Level of Provision

JEL Classification: H41