Matching Versus Raffles as a Fund-Raising Device

Abstract

Matching is a commonly used fund-raising tactic, whereby small donors have their donation to a charity matched via a fund established by large donors. I developed a model in which a single large donor decides whether to establish a matching fund or contribute to the public good via the voluntary contributions mechanism (VCM). The credibility of the matching fund is an endogenous component of the model. For a match to be credible, the organizer must have a credible promise not to top up the contributions of the small donors. If the number of small donors is sufficiently large, there always exists a matching fund that is both credible and leads to a Pareto improvement relative to the VCM. When the matching fund needs to satisfy an endogenous credibility constraint, all of the outcomes that are eliminated due to this constraint are outcomes under which small donors are worse off relative to the VCM. The matching fund is also compared with a raffle mechanism. As the number of small donors grows large, public good provision under the two mechanisms converges. However, the matching function outperforms the raffle when there is a finite number of small donors.