On the private exchange of charitable gifts

The private exchange of charitable gifts (e.g. charity gift-cards) has recently become an important source of donations to charities, In this paper we study this new phenomenon using the classical model of private provision of public goods, modified to account for exchange of private gifts. Contrary to intuition, we show that a change in social norms characterized by an increase in the amount spent on charitable gifts and a decrease in the amount spent on traditional gifts can decrease the total supply of donations, The magnitude of the change in donations depends on the contributors' degree of altruism, the efficiency of traditional gifts relative to a monetary gift, and the efficiency of charitable gifts in generating warm-glow.