Limiting the Number of Charities
CORE Discussion Paper 2006/74
14 Pages Posted: 19 Nov 2006
Date Written: September 2006
We consider a model where creating a charity implies a fixed cost and individual contributions depend on how close donors feel with respect to the charity. In that setting we show that there are an optimal number of charities and an optimal rate of subsidization that depend on the set-up cost and on the attachment of donors to charities that share the same values as theirs. We also consider the case of free-entry and compare it with the second-best solution controlling for the number of charities.
Keywords: charities, joy of giving
JEL Classification: L31, H41
Suggested Citation: Suggested Citation