Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5034551 | Journal of Economic Behavior & Organization | 2017 | 18 Pages |
Abstract
Charities frequently rely on professional solicitors whose commissions exceed half of the solicited donations. To understand this practice, we propose a principal-agent model in which the charity optimally offers a higher commission to a more efficient solicitor, raising the price of giving significantly. Outsourcing is, therefore, profitable for the charity only if giving is very price-inelastic, which is not supported by empirical evidence. We show that outsourced fundraising can be optimal if: donors are unaware of this practice; the professional solicitor better activates donors' warm-glow feelings toward the cause; or there is a significant fixed cost of fundraising. We argue that informing the public of the mere existence of paid solicitations may be the most effective policy available.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Zdravko Paskalev, Huseyin Yildirim,