Games of Charitable Giving

Abstract

This dissertation develops models of charitable giving in the presence of uncertainty. The model of chapter 2 studies a two-stage signaling game of charitable donations with two players: a charity manager and a wealthy donor. A representative charity manager, who is perfectly informed, collects a donation from a representative donor, who has imperfect information about the manager's types. The manager uses the donation to produce a public good, and in the process decides whether to create waste in order to obtain a personal gain. I solve for separating and pooling sequential equilibria of the game, and employ the Intuitive Criterion of Cho & Kreps (1987) as a refinement to deal with the problem of multiple equilibria. I find that there exists no fully separating equilibrium in which the donor can discern all possible manager types. In addition, the results suggest that the amount of the initial donation may help the donor to induce the manager to reveal his true type. In chapter 3, I analyze the effect of competitive pressures in the philanthropic sector. I find evidence in support of market systems acting as a disciplining device, which induces the manager to play strategies that increase social welfare. Chapter 4 uses an alternative to expected utility theory, known as Choquet expected utility, to model the interaction between a wealthy donor and a charity manager in the presence of uncertainty.