This year we’ve dealt with some particularly intense manifestations of what one might call the “giver’s dilemma.”

Imagine that two donors, Alice and Bob, are both considering supporting a charity whose room for more funding is $X, and each is willing to give the full $X to close that gap. If Alice finds out about Bob’s plans, her incentive is to give nothing to the charity, since she knows Bob will fill its funding gap. Conversely, if Bob finds out about Alice’s funding plans, his incentive is to give nothing to the charity and perhaps support another instead. This creates a problematic situation in which neither Alice nor Bob has the incentive to be honest with the other about his/her giving plans and preferences – and each has the incentive to try to wait out the other’s decision.

In this stylized example, our picture of the ideal resolution is for Alice and Bob to be honest with each other and agree to “split” the funding gap: each should give $X*(1/2). In a world where this behavior is expected, people can be honest with each other about their plans and ensure relatively “fair” resolutions rather than withholding information and trying to anticipate each other’s behavior.

In real life, the situation can be more complicated. This year, in finalizing our funding targets for top charities, we faced the following three questions. In each case, we are actively trying to avoid behavior that amounts to “waiting out” or “canceling out” donors who are using our research, and trying to preserve the incentive of each donor to give as planned and share information about his/her giving.

1. Should Good Ventures wait until the end of giving season to decide on the size of its grants? (Note: we resolved this question last year and stuck to the same resolution this year, but it remains a puzzling question and a good example for this topic.)

Once we arrive at a “target amount” we would like to see each charity raise, we could wait until the end of giving season before recommending grants to Good Ventures. Since Good Ventures is giving a great deal (a bit more than we expect all individual donors combined to give over the course of the year), this would probably ensure that each charity hits the exact target we set for it, regardless of what individual donors decide.

We think this would be a very problematic approach. It would render individuals’ decisions about which charities to support effectively meaningless: each dollar given to one of our top charities would be fungible with dollars given to other top charities, and anyone who gave to one of our top charities would effectively/implicitly be supporting “GiveWell’s overall allocation” rather than the charity of their choice. This, in turn, would give individuals the ongoing incentive to try to wait out Good Ventures, and would potentially reduce both giving and reporting of giving.

Instead, we and Good Ventures agreed that the Good Ventures grants should be finalized and announced before the start of giving season. Our recommendations have taken into account what we expect individuals to do, but our projections are approximate and non-binding, and any given individual decision has real impact on the total raised by the recipient charity.

It’s true that in an indirect, approximate sense, supporting a given charity now may change our projections of what will happen next year and therefore cause Good Ventures to give less to the target charity next year. However, this is a very indirect and rough link, since situations change dramatically from year to year; our ability to predict donor behavior is quite limited; and we generally aim for round numbers with Good Ventures grants.

2. Should we post updates on how giving is going, so that donors can adjust their behavior accordingly?

Posting too many updates would risk a similar problem to the one described above. We don’t want a situation in which each donor’s gift to charity X causes another donor to give less to the charity; this would create an incentive for donors to try to wait each other out.

We do intend to post a notice when a given charity appears sure to hit its “maximum” – the most we think it could absorb before hitting a point of seriously diminishing returns. This will help donors avoid supporting a charity to go well over what we think is a reasonable amount of funding, without allowing donors to “cancel each other out” at a more granular level. In other words, if you give to a charity, you can expect that your donation will raise the total amount the charity takes in, by the amount of your donation – unless the charity ends up easily hitting its maximum, in which case your donation will be partly offset by the behavior of other donors who agree with us about where the maximum ought to be. We think this is a reasonable practical position.

Note that we will also be doing an update in early 2015 on each charity’s room for more funding situation. 2015 donors may take this information into account and may therefore do some degree of “canceling out” 2014 donors. Our basic position is that “canceling out” can be a good thing when it is a result of charities’ running out of room for more funding, and is acceptable/inevitable over relatively long periods of time, but that we should avoid situations in which some GiveWell-influenced donors are “canceling out” others at a more granular level and targeting an exact amount of total money moved.

3. How should we handle major donors who have privately told us about their giving plans and disagree with us on ideal funding targets?

A donor recently told us of their intention to give $1 million to SCI. We and the donor disagree about what the right “maximum” for SCI is: we put it at $6.3 million, while the donor – who is particularly excited about SCI relative to our other top charities – would rather see SCI as close as possible to the very upper end of its range, meaning they would put the maximum at $8.3 million. (This donor is relying on our analysis of room for more funding but has slightly different values.)

If we set SCI’s total target at $6.3 million, and took into account our knowledge of this donor’s plans, we would recommend a very small amount of giving – perhaps none at all – this giving season, since we believe SCI will hit $6.3 million between the $3 million from Good Ventures, $1 million from this donor, and other sources of funding that we detailed in our previous post. The end result would be that SCI raised about $6.3 million, while the donor gave $1 million. On the other hand, if the donor had not shared their plans with us, and we set the total target at $6.3 million, we would recommend $1 million more in support to SCI this giving season; the donor could wait for the end of giving season before making the gift. The end result would be that SCI raised about $7.3 million, while the donor gave $1 million.

We discussed what to do about this situation at length, and ended up pursuing a version of the “split the difference” heuristic. Since an informational advantage on our part would lead to SCI’s raising a total of ~$6.3 million, while an informational advantage on the donor’s part would lead to SCI’s raising a total of ~$7.3 million (in both cases including $1 million from the donor), we have set the total target at $6.8 million – the midpoint of those two figures. This is a compromise between “making no use of the information the donor has given us” (which we feel would be unfair to our audience) and “making full use of the information the donor has given us” (which we feel would be antagonistic to the donor and would give an incentive to not share plans with us in the future). We’ve discussed this resolution with the donor and agreed to it as representing good-faith behavior on both sides.

Your thoughts?

In all of the above cases, we’re largely improvising and looking for pragmatic solutions. We haven’t worked out a detailed framework for laying out principles and responding to different possible situations regarding the “giver’s dilemma.” We’d love thoughts from our audience on these matters.