Do Nonprofits Engage in Excessive Fundraising?

Gayle, Philip (2024): Do Nonprofits Engage in Excessive Fundraising?

Abstract

This study examines whether nonprofits (NP) engage in ‘excessive’ fundraising (EF) relative to what may be socially optimal. The investigation requires using a structural empirical model to approximate socially optimal fundraising levels. The analysis reveals evidence of EF of up to 31% in a year and identifies the “donor-stealing” attribute of fundraising across rival NPs as a key driver of EF. I show that if rival NPs cooperatively set fundraising levels, then this practice effectively eliminates EF since each NP internalizes the “donor-stealing” effect. The findings support united fund drives like those we see mobilized by the United Way.

• Item Type: MPRA Paper
• Language: English
• Keywords: Nonprofit Organizations; Excessive Fundraising
• Subjects: L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets; L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L22 - Firm Organization and Market Structure; L - Industrial Organization > L3 - Nonprofit Organizations and Public Enterprise > L30 - General

References

Aldashev, Gani, Marco Marini, Thierry Verdier (2014). “Brothers in alms? Coordination between nonprofits on markets for donations,” Journal of Public Economics, Vol. 117, pp. 182-200.

Alpizar, F., F. Carlsson, and O. Johansson-Stenman (2008). “Anonymity, reciprocity, and conformity: evidence from voluntary contributions to a National Park in Costa Rica,” Journal of Public Economics, Vol. 92, pp. 1047–1060.

Andreoni, James and A. Abigail Payne (2011). “Is crowding out due entirely to fundraising? Evidence from a panel of charities,” Journal of Public Economics, Vol. 95, pp. 334-343.

Andreoni, J., J.M. Rao, and H. Trachtman (2011). “Avoiding the ask: a field experiment on altruism, empathy, and charitable giving,” NBER Working Paper No. 17648.

Berry, S. (1994). “Estimating Discrete-Choice Models of Product Differentiation,” The RAND Journal of Economics, Vol. 25, No. 2 (Summer, 1994): 242-262.

DellaVigna, S., J.A. List and U. Malmendier (2012). “Testing for altruism and social pressure in charitable giving,” The Quarterly Journal of Economics, 127 (1), 1–56.

Eckel, C.C., and P.J. Grossman (2008). “Subsidizing charitable contributions: a natural field experiment comparing matching and rebate subsidies,” Experimental Economics, 11 (3), 234–252.

Eckel, C., D. Herberich and J. Meer (2015). “It's Not the Thought that Counts: A Field Experiment on Gift Exchange and Giving at a Public University,” Working Paper.

Falk, A., 2007. “Gift exchange in the field,” Econometrica, Vol. 75, pp. 1501–1511.

Gayle, Philip G. and Teresa D. Harrison (2023) “Competition and Strategic Responses to Fundraising in Donative Markets,” Manuscript, Kansas State University. https://mpra.ub.uni-muenchen.de/120459/1/MPRA_paper_120459.pdf

Harbaugh, W., (1998). “What do donations buy? A model of philanthropy based on prestige and warm glow,” Journal of Public Economics, 67 (2), 269–284 (February).

Huck, S., I. Rasul and A. Shepherd (2015). “Comparing charitable fundraising schemes: evidence from a natural field experiment and a structural model,” American Economic Journal: Economic Policy, 7 (2), 326–369.

Ivaldi, Marc and Frank Verboven (2005). “Quantifying the effects from horizontal mergers in European competition policy,” International Journal of Industrial Organization, Volume 23, Issues 9–10, December 2005, Pages 669–691.

Jacobs, Fred A. and Nicholas Marudas (2006). “Excessive, optimal, and insufficient fundraising among the Nonprofit Times 100,” International Journal of Nonprofit and Voluntary Sector Marketing, Vol. 11, pp. 105–114.

Karlan, D. and J.A. List (2007). “Does price matter in charitable giving? Evidence from a largescale natural field experiment,” American Economic Review, 97 (5), 1774–1793.

Krieg, Justin and Anya Samek (2017) “When charities compete: A laboratory experiment with simultaneous public goods,” Journal of Behavioral and Experimental Economics, Vol. 66, pp. 40-57.

Khanna, J., J. Posnett, and T. Sandler (1995). “Charity donations in the UK: new evidence based on panel data,” Journal of Public Economics, Vol. 56, pp. 257–272.

Khanna, J., and T. Sandler (2000). “Partners in giving: the crowding-in effects of UK government grants,” European Economic Review, Vol. 44, pp. 1543–1556.

Marudas, Nicholas and Fred A. Jacobs (2007) “The extent of excessive or insufficient fundraising among US arts organizations and the effect of organizational efficiency on donations to US arts organizations,” International Journal of Nonprofit and Voluntary Sector Marketing, Vol. 12, pp. 267–273.

Meer, Jonathan (2017) “Does fundraising create new giving?” Journal of Public Economics, Vol. 145, pp. 82-93.

Meer, J. and H.S. Rosen (2011). “The ABCs of charitable solicitation,” Journal of Public Economics. 95 (5), 363–371.

Mungan, Murat C., and Baris K. Yoruk (2012) “Fundraising and Optimal Policy Rules,” Journal of Public Economic Theory, 14 (4), 2012, pp. 625–652.

Okten, Cagla and Burton A. Weisbrod (2000) “Determinants of donations in private nonprofit markets,” Journal of Public Economics, Vol. 75, pp. 255-272.

Posnett, J., and T. Sandler (1989). “Demand for charity donations in private non-profit markets: the case of the UK,” Journal of Public Economics, Vol. 40, pp. 187–200.

Rose-Ackerman, Susan (1982). “Charitable Giving and “Excessive” Fundraising,” The Quarterly Journal of Economics, Vol. 97, No. 2 (May 1982), pp. 193-212.

Schervish, P. G., and J. J. Havens (1997). “Social participation and charitable giving: A multivariate analysis,” Voluntas: International Journal of Voluntary and Nonprofit Organizations, Vol. 8, pp. 235–260.

Yoruk, B. K. (2009). “How responsive are charitable donors to requests to give?” Journal of Public Economics, Vol. 93, pp. 1111–1117.