Murat C. Mungan, Florida State University College of Law, 425 W. Jefferson Street, Tallahassee, FL 32301 (email@example.com). Barş K. Yörük, Department of Economics, University at Albany, SUNY, 1400 Washington Ave., Albany, NY 12222 (firstname.lastname@example.org).
Fundraising and Optimal Policy Rules
Article first published online: 24 JUL 2012
© 2012 Wiley Periodicals, Inc.
Journal of Public Economic Theory
Volume 14, Issue 4, pages 625–652, August 2012
How to Cite
MUNGAN, M. C. and YÖRÜK, B. K. (2012), Fundraising and Optimal Policy Rules. Journal of Public Economic Theory, 14: 625–652. doi: 10.1111/j.1467-9779.2012.01555.x
We thank Hideo Konishi, Larry Kranich, Tayfun Sönmez, and Richard Tresch for their helpful discussions and comments. All errors remain ours.
- Issue published online: 24 JUL 2012
- Article first published online: 24 JUL 2012
- Received November 28, 2009; Accepted November 2, 2010.
This paper develops a simple spatial model of fundraising, in which charities select a target population to solicit donations. First, we show that in a competitive charity market without any intervention, the number of charities in the market and/or the overall net funds raised by charities may be suboptimal. Next, we analyze whether a social planner can prevent such shortcomings and show that a regulatory mechanism can be designed to achieve socially desirable outcomes. In contrast to the previous literature, our model does not necessarily produce monopoly as the optimal market structure. We show that if fixed costs associated with establishing charities are sufficiently low, then the optimal market structure is not a monopoly. Given the importance of the trade-off between the volume and variety of charitable services, we argue that this result may be of particular interest to policy makers.