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

Nadine Chlaß, Lata Gangadharan () and Kristy Jones

Oxford Economic Papers, 2023, vol. 75, issue 4, 941-961

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.

JEL-codes: C91 D64 L31 (search for similar items in EconPapers)
Date: 2023
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