The Dark Side of Transparency: Mission Variety and Industry Equilibrium in Decentralized Public Good Provision

Thierry Verdier, Gani Aldashev and Esteban Jaimovich

No 15030, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study the implications of transparency policies on the decentralized public good provision, by focusing on how the moral hazard problem inside non-profits interacts with the competitive structure of the sector under alternative informational regimes. More transparency on the use of funds has an ambiguous effect on the total public good provision and the welfare of donors. On the one hand, more transparency encourages non-profit managers to devote more resources to curbing rent-seeking inside organizations. On the other hand, it tilts the playing field against non-profits managers who face higher cost of monitoring, inducing them to abandon their missions. From the donors' perspective, there are two corresponding opposing effects: transparency is good because of the reduction in rent-seeking in the non-profits active in the market, but it can backfire because of a lower diversity of non-profits. Donors' welfare is lower under transparency (than under no information on the use of funds) for intermediate levels of asymmetry in the cost of monitoring.

Keywords: Non-profit organizations; Charitable giving; altruism; transparency (search for similar items in EconPapers)
JEL-codes: D23 D43 D64 L31 (search for similar items in EconPapers)
Date: 2020-07
New Economics Papers: this item is included in nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: The Dark Side of Transparency: Mission Variety and Industry Equilibrium in Decentralised Public Good Provision (2023)
Working Paper: The dark side of transparency: mission variety and industry equilibrium in decentralised public good provision (2023)
Working Paper: The dark side of transparency: mission variety and industry equilibrium in decentralised public good provision (2023)
Working Paper: The Dark Side of Transparency: Mission Variety and Industry Equilibrium in Decentralized Public Good Provision (2022)
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