Preempting the Comparison: Quality Disclosure and Fundraising Competition

Abstract

In many markets for public goods and services, consumers are not the actors who allocate resources to providers, weakening the feedback loops that ordinarily discipline low-quality providers. Performance disclosure is a common policy response, but its effects depend on how providers respond strategically. We study this question in charitable giving, where donors fund public goods for beneficiaries and provider efficiency is difficult to observe. In a pre-registered framed field experiment, real-world charity managers make incentivized decisions to enter fundraising competitions against a rival serving the same cause. We vary relative efficiency, whether the charity reaches donors before or alongside the rival, and whether donors observe efficiency. Disclosure strengthens market discipline in one dimension: managers are more willing to compete when their charity is more efficient than the rival and less willing to compete when it is less efficient. Yet disclosure also gives low-efficiency charities an incentive to reach donors before unfavorable comparisons occur. Transparency can therefore alter the form of competition rather than simply restore discipline, with potential consequences for the efficiency of public good provision.