Coordinating donations via an intermediary: The destructive effect of a sunk overhead cost

Abraham, Diya, Corazzini, Luca, Fišar, Miloš and Reggiani, Tommaso ORCID: https://orcid.org/0000-0002-3134-1049 2023. Coordinating donations via an intermediary: The destructive effect of a sunk overhead cost. Journal of Economic Behavior and Organization 211 , pp. 287-304. 10.1016/j.jebo.2023.05.006 Item availability restricted.

PDF - Accepted Post-Print Version Restricted to Repository staff only until 17 November 2024 due to copyright restrictions. Download (6MB) | Request a copy

Abstract

Donors often use the services of an intermediary to prevent their donations from being too thinly distributed over multiple public projects. We explore whether donors’ willingness to coordinate their funds via an intermediary depends on the extent of the intermediary’s discretion over their contributions, as well as the organizational overhead costs incurred by the intermediary. We investigate this using a laboratory experiment in which donors face multiple identical threshold public goods and the opportunity to coordinate their contributions via another donor assigned to the role of intermediary. In line with standard game theoretic predictions, we find that donors make use of the intermediary only when they know she is heavily restricted in terms of the proportion of their contributions she can expropriate for herself. However, we find strong evidence that the positive effect of these restrictions is undone once the intermediary incurs a sunk overhead cost. Our analysis suggests that the ex-ante inequality created as a result of this sunk cost reduces the trustworthiness of the intermediary in the donors’ eyes, which in turn reduces the donors’ willingness to use the intermediary to coordinate their contributions effectively.

Item Type:	Article
Date Type:	Published Online
Status:	Published
Schools:	Business (Including Economics)
Subjects:	H Social Sciences > HB Economic Theory
Uncontrolled Keywords:	Overhead aversion, Threshold public goods, Delegation, Fundraising.
Publisher:	Elsevier
ISSN:	0167-2681
Funders:	GACR (Czechia - GA20-06785S), Masaryk University (Czechia - 1368/2020)
Date of First Compliant Deposit:	18 May 2023
Date of Acceptance:	2 May 2023
Last Modified:	06 Dec 2023 02:49
URI:	https://orca.cardiff.ac.uk/id/eprint/159583

Actions (repository staff only)

Edit Item