The Optimal Design of Charitable Lotteries: Theory and Experimental Evidence

Experiments Investigating Fundraising and Charitable Contributors

ISBN: 978-0-76231-301-3, eISBN: 978-1-84950-406-5

ISSN: 0193-2306

Publication date: 7 July 2006

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.

Citation

Lange, A., List, J., Price, M. and Price, S. (2006), "The Optimal Design of Charitable Lotteries: Theory and Experimental Evidence", Isaac, R. and Davis, D. (Ed.) Experiments Investigating Fundraising and Charitable Contributors (Research in Experimental Economics, Vol. 11), Emerald Group Publishing Limited, Bingley, pp. 93-119. https://doi.org/10.1016/S0193-2306(06)11004-2

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Emerald Group Publishing Limited

Copyright © 2006, Emerald Group Publishing Limited

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