Working Paper: CEPR ID: DP8109
Authors: Gani Aldashev; Marco Marini; Thierry Verdier
Abstract: This paper studies the stability of coordination between mission-driven non-governmental organizations (NGOs) competing for donations. We build a non-cooperative game-theoretic model of alliance formation between NGOs that compete through fundraising activities and impose externalities on each others? output. We derive general results on the stability of full coordination under two classes of alliance-formation rules: unanimity and aggregative. If fundraising activities are strategic complements, the grandcoalition (i.e. full coordination) is always individually stable and, under the unanimity rule, coalitionally stable. When fundraising activities are strategic substitutes, the grandcoalition can be unstable and the instability is more likely, the steeper are NGOs? (negatively sloped) best-reply functions. Under the aggregative rule, the grandcoalition is stable: (i) individually, if there are negative coalitional externalities; (ii) coalitionally, if breaking an alliance requires the majority of NGOs involved in the alliance.
Keywords: coordination; endogenous coalition formation; giving; NGOs; nondistribution constraint
JEL Codes: C72; D74; L31; L44
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| fundraising activities are strategic complements (L39) | grand coalition of NGOs is always individually stable (D71) |
| fundraising activities are strategic substitutes (L39) | grand coalition can become unstable (D74) |
| nature of fundraising strategy (L21) | stability of coalitions (C71) |
| aggregative rule (D71) | grand coalition remains stable under certain conditions of negative coalitional externalities (D79) |
| coordination (P11) | fundraising success (L31) |