Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/267962 
Year of Publication: 
2021
Series/Report no.: 
MUNI ECON Working Paper No. 2021-14
Publisher: 
Masaryk University, Faculty of Economics and Administration, Brno
Abstract: 
Experimental studies have modeled individual funding of social projects as contributions to a threshold public good. We examine donors’ behavior when they face multiple threshold public goods and the possibility of coordinating their contributions via an intermediary. Employing the experimental design developed in Corazzini, Cotton, and Reggiani (2020), we vary both the size of a ‘destination rule’, which places restrictions on the intermediary’s use of a donor’s funds, as well as the overhead cost of the intermediary, modeled as a sunk cost incurred by the intermediary whether or not any of the public goods are successfully funded. We show that subjects behave in line with equilibrium predictions with regard to the size of the destination rule, only increasing their contributions in the presence of a relatively high destination rule that prevents expropriation by the intermediary. However, we find that the positive effect of a high destination rule is undone in the presence of overhead sunk costs on the intermediary, thus providing evidence in favor of the sunk-cost bias and ‘overhead aversion’ that are commonly exhibited by donors when selecting charities.
Subjects: 
overhead aversion
threshold public goods
delegation
fundraising
JEL: 
C91
C92
H40
H41
L31
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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