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 organization-public 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 donor’s satisfaction with the donation experience.

Keywords: Organizational Communication, Voluntary Disclosure, Nonprofit Organizations, Donations, Prosocial Behavior, Game Theory, Organization-Public Relations, Charities, Donors

JEL Classification: C70, H84, L31