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Journal of Economics

, Volume 118, Issue 3, pp 239–263 | Cite as

Nonprofit organizations, free media and donor’s trust

  • Maja Adena
Article

Abstract

Nonprofit organizations (NPOs) solicit donations from individuals and in turn offer goods and services whose quality cannot be (easily) ascertained by the donors. This creates incentives for “bad” NPOs to enter the market and free ride on donor trust. This paper presents a model in which the media helps to reduce the problem of asymmetric information in the market for NPOs. This occurs through two channels. On the one hand, the media can, with some probability, uncover a “bad” organization if it has entered the market. On the other hand, the media reduces the incentives for bad types to enter the market in the first place. Overall, the media enhances the trust of the donors and increases the level of donations and the amount of public good produced.

Keywords

Nonprofits Charitable giving Asymmetric information Media 

JEL Classification

H24 H31 D12 

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Copyright information

© Springer-Verlag Wien 2016

Authors and Affiliations

  1. 1.WZBBerlinGermany

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