Seeds to succeed?. Sequential giving to public projects

Anat Bracha, Michael Menietti, Lise Vesterlund

Research output: Contribution to journalArticlepeer-review

Abstract

The public phase of a capital campaign is typically launched with the announcement of a large seed donation. Andreoni (1998) argues that such a fundraising strategy may be particularly effective when funds are being raised for projects that have fixed production costs. The reason is that when there are fixed costs of production simultaneous giving may result in both positive and zero provision equilibria. Thus absent announcements donors may get stuck in an equilibrium that fails to provide a desirable public project. Andreoni (1998) demonstrates that such inferior outcomes can be eliminated when the fundraiser initially secures a sufficiently large seed donation. We investigate this model experimentally to determine whether announcements of seed money eliminate the inefficiencies that may result under fixed costs and simultaneous provision. To assess the strength of the theory we examine the effect of announcements in both the presence and absence of fixed costs. Our findings are supportive of the theory for sufficiently high fixed costs.

Original languageEnglish
Pages (from-to)416-427
Number of pages12
JournalJournal of Public Economics
Volume95
Issue number5-6
DOIs
StatePublished - Jun 2011
Externally publishedYes

Keywords

  • Charitable giving
  • Coordination
  • Fundraising
  • Public goods
  • Seed money
  • Sequential giving

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

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