A Game-Theoretic Model of Disclosure–Donation Interactions in the Market for Charitable Contributions

Abstract

The information organizations choose to disclose is a strategic consideration. The ''success'' of strategic disclosure is contingent in turn on the target audience's values and preferences. The disclosure of and reaction to organizational information thus involves a strategic interaction between the producer and consumer of the information, yet prior communication research has focused on only one side or the other of this equation. In response, we examine organizationÁpublic interactions in a domain with key, measurable outcomes*the charitable donations marketplace*and propose a game-theoretic explanation of organizational disclosures and individual donations. The study specifically emphasizes two core donor preferences*the desire for impact and the desire for publicity*with donors choosing between organizations based on how well the organization satisfies these preferences. Organizations' optimal level of disclosure, in turn, depends on their own ''type'' and the types of donors they attract. This study recommends organizations think of their disclosure and efficiency-related decisions as conveying valuable, yet distinct, information to two ideal-types of prospective donors: the impact maximizer and the publicity maximizer. Mapping and targeting the ''right'' mix of donors is a key managerial decision that ultimately impacts both the organization's financial outcomes and donors' satisfaction with the donation experience. Information disclosure is a communication tool that individuals and organizations alike employ to influence decision making. This is keenly evident in the market for charitable contributions, where nonprofit organizations try to sway potential donors through the strategic release of financial, performance, and fundraising-related data intended to not only boost accountability and public trust but also attract greater donations (Gandía, 2011;Saxton & Guo, 2011). To better comprehend such processes involving both the determinants and behavioral outcomes of communication decisions, we need a theoretical approach that integrates the strategic, interactive nature of decision making undertaken by both producers and consumers of information.Communication studies to date have generally focused exclusively on either the source or the receiver of this communication process. To remedy this, we propose a game-theoretic explanation of disclosureÁdonation interactions. Such an approach explicitly incorporates the decision making undertaken by both the donor and the discloser in the fundraising arena. Our model also recognizes that payoffs associated with strategically disclosed fundraising information are contingent on individual donors' values and preferences: Donors react differently based on the extent to which they are motivated by altruism, vested interests, fairness, social impact, publicityseeking, or the ''warm glow'' from donating (e.g., Anker, Feeley, & Kim, 2010;Bergstrom, Blume, & Varian, 1986;Sargeant, 2001). By incorporating multiple forms of donor utility (satisfaction), the model strives to e...

The Relationship Between Disclosure and Household Donations to Nonprofit Organizations in Australia

“…Each type of disclosure practice is discussed separately in the next three sections. Previous empirical studies have found a positive relationship between the extent of disclosure and total donations (Parsons, 2003; Saxton & Zhuang, 2013; Trussel & Parsons, 2008; van der Heijden, 2013).…”

“…Extending from the empirical literature, Saxton and Zhuang (2013) used game theory to model the relationship between nonprofit disclosure and donations. Saxton and Zhuang defined efficiency using programming spend ratios, which tap into the proportion nonprofits spend on programs as opposed to fundraising or administration.…”

Portrayals of the Poor on the Cusp of Capitalism

“…One of the most persuasive means used to draw in donations is creating a perception of a personal connection for the donor to make donors feel as if they make a difference. Having an impact is important to donors (Saxton & Zhuang, 2013). Clair and Anderson (2012) show Kiva’s use of the personal-connection-form of advertising in which donors are led to believe that they may pick the person to whom they wish to have their loan/donation sent, backfired when it was revealed that no such practice was taking place; instead, Kiva bundles the money and supplies it to the Grameen Bank., The revelation triggered “over 10,000 hits and thousands of twitter postings” from disgruntled donors (Strom, 2009, n.p.).…”

“…The illusion of limited resources is important for a nonprofit’s legitimacy. As Saxton and Zhuang (2013) pointed out, people measure the legitimacy of the nonprofit by ratio of proceeds disbursed to the money spent on overhead.…”

Two-stage security screening strategies in the face of strategic applicants, congestions and screening errors

“…Game theory is the study of mathematical models of conflict and cooperation among decision-makers (Myerson 1997). It is mainly used in political science (Downs 1957;Hausken and Zhuang forthcoming), logic (Smith and Price 1973), biology (Ben-David et al 1994), psychology (Colman 2003;Xu and Zhuang, forthcoming), donation (Zhuang et al 2014;Saxton and Zhuang 2013), and economics (Aparicio and Sanchez-Soriano 2008;Agarwal and Zeephongsekul 2011). Researchers apply game theory to study security problems, such as optimization of resource allocation (Xu et al forthcoming; Xiang and Zhuang forthcoming).…”