If big donors have much better opportunities than small donors, then small donors can go to Las Vegas, or Wall Street

Abstract

For various reasons, donors giving large amounts may be able to achieve more per dollar with their donations, enjoying economies of scale. When this is true, small donors may be able to do more good by exchanging a donation for a lottery with a 1/n chance of delivering a donation n times as large. In practice, transaction costs and taxation mean the donation will be smaller, a cost which must be compared against scale economies. However, the use of randomization, casino gambling, derivatives, and other institutions can limit lottery costs to a modest factor, lowest when investments are used. So small donors who believe strong scale economies exist can take advantage of them.