What do donations buy?: A model of philanthropy based on prestige and warm glow

Charities publicize the donations they receive, generally according to dollar categories rather than the exact amount. Donors in turn tend to give the minimum amount necessary to get into a category. These facts suggest that donors have a taste for having their donations made public. This paper models the effects of such a taste for “prestige” on the behavior of donors and charities. I show how a taste for prestige means that charities can increase donations by using categories. The paper also discusses the effect of a taste for prestige on competition between charities.