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The Optimal Design of Charitable Lotteries: Theory and Experimental Evidence

In: Experiments Investigating Fundraising and Charitable Contributors

Author

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  • Andreas Lange
  • John A. List
  • Michael K. Price
  • Shannon M. Price

Abstract

Charitable lotteries represent one of today's most popular fund-raising schemes. This study begins by developing theory examining the optimal design of a charitable lottery. We show that any prize distribution is only optimal for a group of n symmetric agents with given risk preference. However, there exist multiple prize distributions that generate contributions approaching the optimal level over a range of individual risk posture. We test our theory using a battery of experimental treatments. Our results suggest that lotteries dominate the voluntary contribution mechanism (VCM) in terms of total dollars raised. Moreover, the performance of lotteries weakly depends on individual risk preference.

Suggested Citation

  • Andreas Lange & John A. List & Michael K. Price & Shannon M. Price, 2006. "The Optimal Design of Charitable Lotteries: Theory and Experimental Evidence," Research in Experimental Economics, in: Experiments Investigating Fundraising and Charitable Contributors, pages 93-119, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:rexezz:s0193-2306(06)11004-2
    DOI: 10.1016/S0193-2306(06)11004-2
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