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This paper presents a utility function model of donors who need to determine their donation to a charity organization that structures and publishes donations by tiers. By considering the prestige associated with each tier level, the analysis suggests that a tiered scheme generates an incentive for donors to raise their donation to the next tier when the originally intended donation is close to the minimum amount for the next tier level. Using publicly available federal tax return data and actual donations to a private high school, the authors present a method to estimate the model parameters. By taking other nonquantifiable factors into consideration, the tool can guide a charitable organization to determine an effective fundraising tier strategy.
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