44 Pages Posted: 8 Sep 2012
Date Written: September 7, 2012
When beginning a new project charities typically appeal to donors with a fundraising goal and a description of the project. For example, an organization may announce a $200 million campaign to construct a new hospital. While goals are commonly used by fundraisers, there is little theoretical understanding of why they should be successful. We argue that the success of goals may result from provision being more certain at the goal level. The goal induces a threshold like effect on the donors generating a subgame perfect equilibrium with larger total donations than the equivalent game without a goal. Experimental data suggests that announcing a goal does benefit fundraisers. Reducing the uncertainty at the goal does not further increase contributions to fundraisers, but does benefit donors. Simulations of large economies indicate the effect on the size of donations can be quite large, substantially increasing donations while simultaneously enlarging the set of contributors.
Keywords: public goods, fundraising
JEL Classification: H41
Suggested Citation: Suggested Citation