Competition and Strategic Responses to Fundraising in Donative Markets

Philip Gayle () and Teresa Harrison

No 2024-9, School of Economics Working Paper Series from LeBow College of Business, Drexel University

Abstract: Nonprofit (NP) organizations provide key social service goods but rely on donations, obtained in a competitive environment, for that provision. Yet most research focuses on competition in the output markets without considering inter-and intra-sector competition in the markets for donations. This paper develops and estimates a model of NPs' fundraising to secure donations. We highlight the strategic nature of the fundraising decision and show theoretically that rival NPs' fundraising responses can be either strategic complements or strategic substitutes but find empirically that responses are predominantly strategic substitutes. We find that donors are relatively inelastic to fundraising but also that NPs have nontrivial responses to rival's fundraising and these effects are stronger within than across sectors. However, in totality, the across sector impacts are important to consider. We find that counterfactually removing a NP from a market increases equilibrium NP-level fundraising but decreases total fundraising in the market.

Keywords: Nonprofits; Fundraising; Donative Markets (search for similar items in EconPapers)
JEL-codes: L13 L22 L30 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2023-12-04, Revised 2024-08-01
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Working Paper: Competition and strategic responses to fundraising in donative markets (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:drxlwp:2024_009

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