Brothers in Alms? Coordination Between NGOs on Markets for Development Donations

This paper studies the stability of coordination between mission-driven nonprofit organizations competing for donations. We build a non-cooperative game-theoretic model of alliance formation between nonprofits that compete through fundraising activities and impose externalities on each others' output. We derive general results on the stability of full coordination under two common classes of alliance-formation rules: unanimity and aggregative. If fundraising activities are strategic complements, full coordination (i.e. the grandcoalition) is always individually stable and, under the unanimity rule, coalitionally stable. When fundraising activities are strategic substitutes, full coordination can be unstable; instability is more likely when nonprofits' (negatively sloped) best-reply functions are steeper. Under the aggregative rule, full coordination is stable: (i) individually, if there are negative coalitional externalities; (ii) coalitionally, if breaking an alliance requires the majority of nonprofits involved in the alliance.