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The effect of seed money and matching gifts in fundraising: A lab experiment

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  • Saboury, Piruz
  • Krasteva, Silvana
  • Palma, Marco A.

Abstract

Existing experimental studies find weak support for the theoretical prediction that matching leadership giving alleviates free-riding and raises more voluntary contributions for public goods relative to seed money. However, while most experimental studies use exogenous variations of the leadership gift, theoretical models allow for this choice to be made by a strategic lead donor. In order to provide a more direct test of the theoretical prediction, we conduct a laboratory experiment with three sequential strategic players: a fundraiser, a lead donor, and a follower donor. The fundraiser chooses between a matching and a seed money fundraising scheme, followed by sequential contributions by the two donors. We find that matching increases total contributions by almost 10% relative to seed money. Moreover, compared to seed money, matching results in lower contributions by the lead donor and significantly higher contributions by the follower donor, corroborating the theoretical prediction that matching alleviates free-riding by the follower donors. The scheme choice by the fundraisers depends on their level of experience with the two schemes. Fundraisers without prior experience choose matching only 36% of the time, while this percentage increases to 68% for experienced fundraisers.

Suggested Citation

  • Saboury, Piruz & Krasteva, Silvana & Palma, Marco A., 2022. "The effect of seed money and matching gifts in fundraising: A lab experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 194(C), pages 425-453.
    • Handle: RePEc:eee:jeborg:v:194:y:2022:i:c:p:425-453
    DOI: 10.1016/j.jebo.2021.12.019
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    More about this item

    Keywords

    Fundraising; Leadership giving; Matching gift; Seed money;
    All these keywords.

    JEL classification:

    • H00 - Public Economics - - General - - - General
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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