Charity auctions from an economic perspective — literature review

Abstract

One of the most common means of raising funds is the charity auction. At charity auctions, money is collected for a good cause, and the products are purchased for private consumption — the bidders may achieve both public and private gains. The charitable nature of this type of auction makes them different from standard auctions. The paper aims to present the main characteristics of this fundraising strategy as well as make a comparison with other formats of raising money for a good cause, i.a. lotteries. Furthermore, the main differences between charity and non-charity auctions will be explained. The studies do not clearly demonstrate whether the charity auction is a more effective mechanism of raising funds than the lottery. However, there is evidence that both formats outperform voluntary contributions. From the perspective of charity organizations, the most effective charity auction format seems to be the all-pay auction. The studies have also revealed that revenues at charity auctions are higher than at standard auctions.