Work

Charitable giving and intermediation: a principal agent problem with hidden prices

Year: 2023

Type: article

Abstract: Donations are often made through charitable intermediaries that can fund themselves from these same donations. After intermediation, only a fraction of the amount donated may reach the intended beneficiary. The price of charitable output is therefore higher after intermediation than if donors donated directly toward the end cause. At the same time, this price is hidden from donors since they cannot verify how much intermediaries pass on. We show that while donors reduce their donation in intermediation itself, and also reduce their donation because they expect the price of charitable output to increase, both reactions are either fully or partly compensated by their ethical preferences for the recipient’s rights. Charitable output, therefore, can be a Giffen-good.

Source: Oxford Economic Papers

DOI: 10.1093/oep/gpad023

Authors: Nadine Chlaß, Lata Gangadharan, Kristy Jones

Institutions: Friedrich Schiller University Jena, Monash University

Language: English

Topic: Nonprofit Sector and Volunteering

Subfield: Sociology and Political Science

Field: Social Sciences

Domain: Social Sciences

SDG: No poverty

Open Access status: hybrid

Estimated APC paid: $4,628