Andreoni–McGuire algorithm and the limits of warm-glow giving

Huseyin Yildirim

Journal of Public Economics, 2014, vol. 114, issue C, 101-107

Abstract: We provide a full equilibrium characterization of warm-glow giving à la Andreoni (1989, 1990) by extending the Andreoni-McGuire (1993) algorithm. We then generalize and offer an intuitive meaning to the large-economy crowding-out results by Ribar and Wilhelm (2002). The algorithm indexes individuals according to their free-riding levels of the public good. This level is finite for an individual whose donation is always dictated by some altruism or concern for charity. We show that if all individuals have finite free-riding levels, then the crowding-out is complete in a large economy. If, on the other hand, a non-negligible fraction of the population never free rides, then the crowding-out is zero in a large economy. We discuss implications of these extreme crowding-out predictions for charitable behavior and fund-raising strategies.

Keywords: Altruism; Warm-glow; Crowding-out (search for similar items in EconPapers)
JEL-codes: H00 H30 H50 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:114:y:2014:i:c:p:101-107

DOI: 10.1016/j.jpubeco.2013.09.005

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