Prompted to Be Good: The Impact of Certification on the Quality of Charities

Katarina Svitkova

CERGE-EI Working Papers from The Center for Economic Research and Graduate Education - Economics Institute, Prague

Abstract: In this study we model how certification affects managers’ choice of the quality of the nonprofit organizations they run. We analyze a market with one representative charity, run by a manager with some preference for the provision of a charitable good, one donor, and a certification agency. We assume that the nature of the charitable good does not allow for partial provision, thus, the charity can be of two types only: a good charity that spends all its resources on the charitable good, and a bad one that diverts all its resources for the private consumption of its manager (for-profit in disguise). We show that for a wide parameter range, the presence of an honest certifier in the market increases the incentives for managers to choose good charities, leading to an improvement in the market as the share of good charities increases.

Keywords: Quality assurance; certification; moral hazard; experience goods. versus second–best strategic policy. (search for similar items in EconPapers)
JEL-codes: C72 D21 (search for similar items in EconPapers)
Date: 2007-03
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:cer:papers:wp320

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