Question

A philanthropist wants to raise $3,000,000 for his favorite charity. Though he is quite
wealthy, this sum is too much even for him. In order to spur others to contribute, he
establishes a matching grant whereby he will donate $1,000,000 if $2,000,000 is raised
from other donors. Anything less than $2,000,000 and he will contribute nothing.
Suppose that there are 10 prospective donors who are simultaneously deciding how much to
contribute. Assume that a donor’s possible strategies are all real numbers between 0 and
$500,000, measured in dollars. The payoff of a donor is:
1/5 x (Total of Contributions) – Own Contribution
The first term in the payoff is the benefit derived from the money going to a worthy cause
(note that the coefficient 1/5 measures how much the donors care about the cause), and
depends on the contributions of all donors. The second term is the personal cost of making
a contribution.

Suppose that there is no matching grant. Is there a dominant strategy? If so,
find it, if not, explain why not. What will happen in this situation?

Answer 1

Philanthropy is a huge part of what makes America America.

Start with the brute numbers: Our nonprofit sector now employs 11 percent of the U.S. workforce. It will contribute around 6 percent of GDP in 2015 (up from 3 percent in 1960). And this doesn’t take into account volunteering—the equivalent of an additional 5 to 10 million full-time employees (depending on how you count), offering labor worth hundreds of billions of dollars per year.

America’s fabled “military-industrial complex” is often used as a classic example of a formidable industry. Well guess what? The nonprofit sector passed the national defense sector in size way back in 1993.

And philanthropy’s importance stretches far beyond economics. Each year, seven out of ten Americans donate to at least one charitable cause. Contributions are from two to ten times higher in the U.S. than in other countries of comparable wealth and modernity. Private giving is a deeply ingrained part of our culture—a font of social creativity and crucial source of new solutions to national problems. Voluntary efforts to repair social weaknesses, enrich our culture, and strengthen American community life are and always have been a hallmark of our country.

Yet, somehow, there exists no definitive resource that chronicles ­American philanthropy broadly and explains it in a context where it can be fully understood and appreciated. Until now.

This Almanac of American Philanthropy offers everyday citizens, givers, charity workers, journalists, local and national leaders, and others the information needed to put in perspective the vital role that philanthropy plays in all of our daily lives. The facts, stories, and history contained in these pages can fill gaping practical and intellectual holes in our self-awareness.

You will find here an authoritative collection of the major achievements of U.S. philanthropy, lively profiles of the greatest givers (large and small), and rich compilations of the most important ideas, statistics, polls, literature, quotations, and thinking on this quintessentially American topic.

There are also Iliads and Odysseys of human interest in this volume. Some tremendously intriguing Americans of all stripes have poured time and treasure into helping their fellow man. You’ll meet lots of them here.

Absent the passion and resources that our fellow countrymen devote to philanthropy, it’s not only our nation that would be less thriving. Our individual days would be flatter, darker, uglier, more dangerous, and less happy. You’ll find vivid evidence of that in machine-gun presentations throughout this book. Let’s get a taste by meeting a few of the hundreds of philanthropists who populate the almanac.

A philanthropist is someone who engages in philanthropy; donating his or her time, money, and/or reputation to charitable causes. The term may apply to any volunteer or to anyone who makes a donation, but the label is most often applied to those who donate large sums of money or who make a major impact through their volunteering, such as a trustee who manages a philanthropic organization or one who establishes and funds a foundation