Donor coordination

by Eric Rogstad Jan 4 2017

How should donors behave, given that their actions may affect other donors?

Imagine that two donors, Alice and Bob, are both considering supporting a charity whose room for more funding is \$X, and each is willing to give the full \$X to close that gap. If Alice finds out about Bob’s plans, her incentive is to give nothing to the charity, since she knows Bob will fill its funding gap. Conversely, if Bob finds out about Alice’s funding plans, his incentive is to give nothing to the charity and perhaps support another instead. This creates a problematic situation in which neither Alice nor Bob has the incentive to be honest with the other about his/her giving plans and preferences – and each has the incentive to try to wait out the other’s decision.