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

J 2023

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

ABRAHAM, Diya Elizabeth, Luca CORAZZINI, Miloš FIŠAR and Tommaso REGGIANI

Basic information

Original name

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

Authors

ABRAHAM, Diya Elizabeth (372 Ireland, belonging to the institution), Luca CORAZZINI (380 Italy, belonging to the institution), Miloš FIŠAR (203 Czech Republic, belonging to the institution) and Tommaso REGGIANI (380 Italy, guarantor, belonging to the institution)

Edition

Journal of Economic Behavior & Organization, NETHERLANDS, Elsevier, 2023, 0167-2681

Other information

Language

English

Type of outcome

Článek v odborném periodiku

Field of Study

50202 Applied Economics, Econometrics

Country of publisher

Netherlands

Confidentiality degree

není předmětem státního či obchodního tajemství

References:

URL

Impact factor

Impact factor: 2.200 in 2022

RIV identification code

RIV/00216224:14560/23:00134125

Organization unit

Faculty of Economics and Administration

DOI

http://dx.doi.org/10.1016/j.jebo.2023.05.006

UT WoS

001000954100001

Keywords in English

Overhead aversion; Threshold public goods; Delegation; Fundraising

Abstract

V originále

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.

Links

GA20-06785S, research and development project

Name: Experimentální analýza problematiky přispívání na vícenásobné veřejné statky

Investor: Czech Science Foundation

Files attached

1-s2.0-S0167268123001506-main.pdf

Request the author's version of the file

Manuscript_Revised_JEBO-D-22-00578R1.pdf

Request the author's version of the file

Citovat

ABRAHAM, Diya Elizabeth, Luca CORAZZINI, Miloš FIŠAR and Tommaso REGGIANI. Coordinating donations via an intermediary: The destructive effect of a sunk overhead cost. Journal of Economic Behavior & Organization. NETHERLANDS: Elsevier, 2023, vol. 211, July, p. 287-304. ISSN 0167-2681. Available from: https://dx.doi.org/10.1016/j.jebo.2023.05.006.

@article{2283619,
   author = {Abraham, Diya Elizabeth and Corazzini, Luca and Fišar, Miloš and Reggiani, Tommaso},
   article_location = {NETHERLANDS},
   article_number = {July},
   doi = {http://dx.doi.org/10.1016/j.jebo.2023.05.006},
   keywords = {Overhead aversion; Threshold public goods; Delegation; Fundraising},
   language = {eng},
   issn = {0167-2681},
   journal = {Journal of Economic Behavior & Organization},
   title = {Coordinating donations via an intermediary: The destructive effect of a sunk overhead cost},
   url = {https://www.sciencedirect.com/science/article/pii/S0167268123001506?via%3Dihub},
   volume = {211},
   year = {2023}
}

TY  - JOUR
ID  - 2283619
AU  - Abraham, Diya Elizabeth - Corazzini, Luca - Fišar, Miloš - Reggiani, Tommaso
PY  - 2023
TI  - Coordinating donations via an intermediary: The destructive effect of a sunk overhead cost
JF  - Journal of Economic Behavior & Organization
VL  - 211
IS  - July
SP  - 287-304
EP  - 287-304
PB  - Elsevier
SN  - 01672681
KW  - Overhead aversion
KW  - Threshold public goods
KW  - Delegation
KW  - Fundraising
UR  - https://www.sciencedirect.com/science/article/pii/S0167268123001506?via%3Dihub
N2  - 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.
ER  -

ABRAHAM, Diya Elizabeth, Luca CORAZZINI, Miloš FIŠAR and Tommaso REGGIANI. Coordinating donations via an intermediary: The destructive effect of a sunk overhead cost. \textit{Journal of Economic Behavior \&{} Organization}. NETHERLANDS: Elsevier, 2023, vol.~211, July, p.~287-304. ISSN~0167-2681. Available from: https://dx.doi.org/10.1016/j.jebo.2023.05.006.

Detailed Information on Publication Record