Humanitarian Funding in a Multi‐Donor Market with Donation Uncertainty

This study analyzes the trade-off between funding strategies and operational performance in humanitarian operations. If a Humanitarian Organization (HO) offers donors the option of earmarking their donations, HO should expect an increase in total donations. However, earmarking creates constraints in resource allocation that negatively affect HO's operational performance. We study this trade-off from the perspective of a single HO that maximizes its expected utility as a function of total donations and operational performance. HO implements disaster response and development programs and it operates in a multi-donor market with donation uncertainty. Using a model inspired by Scarf's minimax approach and the newsvendor framework, we analyze the strategic interaction between HO and its donors. The numerical section is based on real data from 15 disasters during the period 2012–2013. We find that poor operational performance has a larger effect on HO's utility function when donors are more uncertain about HO's expected needs for disaster response. Interestingly, increasing the public awareness of development programs helps HO to get more non-earmarked donations for disaster response. Increasing non-earmarked donations improves HO's operational efficiency, which mitigates the impact of donation uncertainty on HO's utility function.

[1]  Luk N. Van Wassenhove,et al.  Using OR to adapt supply chain management best practices to humanitarian logistics , 2012, Int. Trans. Oper. Res..

[2]  D. Simchi-Levi,et al.  Minimax analysis for finite-horizon inventory models , 2001 .

[3]  S. Redaelli,et al.  Determinants of International Emergency Aid - Humanitarian Need Only? , 2009 .

[4]  Tina Wakolbinger,et al.  Impacts of earmarked private donations for disaster fundraising , 2014, Ann. Oper. Res..

[5]  A. Apte,et al.  Stochastic Optimization for Natural Disaster Asset Prepositioning , 2010 .

[6]  Luk N. Van Wassenhove,et al.  Vehicle Replacement in the International Committee of the Red Cross , 2009 .

[7]  Ann Melissa Campbell,et al.  Routing for Relief Efforts , 2008, Transp. Sci..

[8]  Luk N. Van Wassenhove,et al.  Temporary Hubs for the Global Vehicle Supply Chain in Humanitarian Operations , 2016 .

[9]  Luk N. Van Wassenhove,et al.  Field Vehicle Fleet Management in Humanitarian Operations: A Case-Based Approach , 2010 .

[10]  Mark A. Turnquist,et al.  Pre-positioning of emergency supplies for disaster response , 2010 .

[11]  Gregory D. Saxton,et al.  A Game-Theoretic Model of Disclosure–Donation Interactions in the Market for Charitable Contributions , 2013 .

[12]  Benita M. Beamon,et al.  Last Mile Distribution in Humanitarian Relief , 2008, J. Intell. Transp. Syst..

[13]  Susan Rose-Ackerman,et al.  Charitable Giving and “Excessive” Fundraising , 1982 .

[14]  Emmett J. Lodree,et al.  An insurance risk management framework for disaster relief and supply chain disruption inventory planning , 2008, J. Oper. Res. Soc..

[15]  Yuwen Chen,et al.  The newsvendor problem: Review and directions for future research , 2011, Eur. J. Oper. Res..

[16]  Nezih Altay,et al.  OR/MS research in disaster operations management , 2006, Eur. J. Oper. Res..

[17]  James Andreoni,et al.  Leadership giving in charitable fund-raising , 2006 .

[18]  Pinar Keskinocak,et al.  Pre-Positioning of Emergency Items for CARE International , 2011, Interfaces.

[19]  Noel Hyndman,et al.  Governance and Charities: An Exploration of Key Themes and the Development of a Research Agenda , 2009 .

[20]  Eleftherios Iakovou,et al.  Optimal newsvendor policies for dual-sourcing supply chains: A disruption risk management framework , 2012, Comput. Oper. Res..

[21]  Amiya K. Chakravarty,et al.  A contingent plan for disaster response , 2011 .

[22]  J. Andreoni.  Toward a Theory of Charitable Fundraising , 1998 .

[23]  Hannes Öhler,et al.  How to Attract Donations: The Case of US NGOs in International Development , 2012 .

[24]  Maria Besiou,et al.  Vehicle Supply Chains in Humanitarian Operations: Decentralization, Operational Mix, and Earmarked Funding , 2014 .

[25]  L. V. Wassenhove,et al.  On the unique features of post‐disaster humanitarian logistics , 2012 .

[26]  Philip C. Jones,et al.  Prepositioning supplies in preparation for disasters , 2011, Eur. J. Oper. Res..

[27]  Luk N. Van Wassenhove,et al.  Designing Efficient Infrastructural Investment and Asset Transfer Mechanisms in Humanitarian Supply Chains , 2012 .

[28]  G. Gallego,et al.  The Distribution Free Newsboy Problem: Review and Extensions , 1993 .

[29]  Zelda B. Zabinsky,et al.  Stochastic optimization of medical supply location and distribution in disaster management , 2010 .

[30]  Christopher W. Zobel,et al.  Quantitatively Representing Nonlinear Disaster Recovery , 2014, Decis. Sci..

[31]  Maqbool Dada,et al.  Pricing and the Newsvendor Problem: A Review with Extensions , 1999, Oper. Res..

[32]  Gülay Barbarosoglu,et al.  An interactive approach for hierarchical analysis of helicopter logistics in disaster relief operations , 2002, Eur. J. Oper. Res..