A Note on the Theory of Charitable Fund-Raising: The Role of Refunds.

Andreoni (1998) shows that a small amount of seed money from the government can generate substantial additional private donations toward the provision of a public good, when there is a threshold level of provision below which no benefits are achieved. We argue that Andreoni's solution can be extended to a mechanism where refunds are possible. We then argue that a greater "bang per buck" may be achieved if the seed money is targeted to cover the administrative costs of providing refunds. Copyright 2001 by Blackwell Publishing Inc.