NGO Competition and the Markets for Development Donations

54 Pages Posted: 26 Jun 2007

See all articles by Gani Aldashev

Gani Aldashev

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES); University of Namur

Thierry Verdier

Paris School of Economics (PSE); Delta - Ecole Normale Superieure (ENS); Centre for Economic Policy Research (CEPR)

Date Written: June 14, 2007

Abstract

Is competition for donations between development NGOs good for welfare? We address this question in a monopolistic competition model à la Salop (1979). NGOs - defined by the non-distribution constraint - compete for donations from donors by exerting fundraising effort. If the market size is fixed, the free-entry equilibrium number of NGOs is usually larger than the optimal number. However, if the market size is endogenous and NGOs both compete and co-operate in attracting new donors, the free-entry equilibrium number of NGOs is generally smaller than the optimal number. If NGOs can divert a part of funds for private use, for a certain range of outside option of NGO entrepreneurs multiple equilibria (with high diversion and no diversion of funds) exist.

Keywords: NGOs, monopolistic competition, non-distribution constraint

JEL Classification: D43, L13, L31

Suggested Citation

Aldashev, Gani and Verdier, Thierry, NGO Competition and the Markets for Development Donations (June 14, 2007). CEPR Discussion Paper No. 6350. Available at SSRN: https://ssrn.com/abstract=996569

Gani Aldashev (Contact Author)

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES) ( email )

Ave. Franklin D Roosevelt, 50 - C.P. 114
Brussels, B-1050
Belgium

University of Namur ( email )

8 rempart de la vierge
Namur, 5000
Belgium

Thierry Verdier

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014
France

Delta - Ecole Normale Superieure (ENS) ( email )

48, Boulevard Jourdan
75014 Paris
France
+33 1 4313 6308 (Phone)
+33 1 4313 6310 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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