The Informational Value Of Sequential Fundraising
Vesterlund, Lise, (2003). The Informational Value Of Sequential Fundraising. Journal Of Public Economics, 87, 3-4, 627–657.
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Discussion
This paper examines a puzzling inconsistency between the theoretical prediction of
private provisions to public goods and actual fundraising behavior. While fundraisers often
choose to announce past contributions, economic theory predicts that contributions will be
largest when donors are uninformed of the contributions made by others. This paper
suggests that an announcement strategy may be optimal because it helps reveal the charity’s
quality. It is shown that when there is imperfect information about the value of the public
good and contributors can purchase information regarding its quality, then there exist
equilibria in which an announcement strategy is optimal. Interestingly, in equilibrium a
high-quality charity receives contributions that exceed those that would result had the
quality of the charity been common knowledge. Hence, an announcement strategy not only
helps worthwhile organizations reveal their type, but it also helps the fundraiser reduce the
free-rider problem.
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This paper has been added by Janek Kretschmer
Discussion