Altruism and Donations

We examine two types of altruism and their implications for voluntary giving. Philanthropists are altruists who wish to enhance the well-being of others, while individuals with merit-good preferences only wish to further the consumption of certain merit goods by others. Philanthropic donors prefer to make cash donations, while donors with merit-good preferences prefer to give in kind. The equilibrium of a donations-game with a philanthropic donor and recipients is efficient, while the equilibrium of a game with a single donor with merit-good preferences is not. Both equilibria are inefficient if there are multiple donors with strategic interaction amongst them.