Brothers in alms? coordination between nonprofits on markets for donations

Mission-driven nonprofi?t organizations compete for donations through fundrais- ing activities. Such competition can lead to inefficient outcomes, if nonpro?fits impose ex- ternalities on each others? output. This paper studies the design of sustainable voluntary cooperation agreements, using a game-theoretic model of alliance formation. Two key char- acteristics determine the stability of cooperation: the alliance formation rule and whether the fundraising efforts of nonprofi?ts are strategic complements or substitutes. Both affect the incentives to deviate from the cooperative agreement (by one or several nonpro?ts). We propose conditions on the alliance formation protocols that facilitate the stability of Pareto-optimal cooperation in fundraising.