Signaling quality through gifts: Implications for the charitable sectorAndreas Lange, Michael Price and Rudy Santore European Economic Review, 2017, vol. 96, issue C, 48-61 Abstract: A popular belief amongst fund-raisers is that potential donors are more generous when provided gifts as part of the solicitation request and there is a growing body of experimental research supporting this belief. To date, such behavior has been modeled through the lens of gift-exchange and reciprocity. We provide an alternate rationale for gift-giving by nonprofit organizations based on the signaling model of Spence (1973). We first show that in the presence of uninformed donors there exists a separating equilibrium under which high quality charities expend scarce resources to signal quality and receive higher donations. We then explore how gift-giving and competition amongst charities impacts net public good provision. In doing so, we highlight a perverse effect – competition amongst charities can lead to lower public good provision when the likelihood a charity is of high quality is high and/or when the difference in quality across high and low type firms narrows. Keywords: Signaling; Charities; Unconditional gifts; Competition (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:96:y:2017:i:c:p:48-61 DOI: 10.1016/j.euroecorev.2017.04.007 Access Statistics for this article European Economic Review is currently edited by T.S. Eicher, A. Imrohoroglu, E. Leeper, J. Oechssler and M. Pesendorfer More articles in European Economic Review from Elsevier |
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