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Coexistence of nonprofit, for‐profit and public sector institutions
Author(s) -
Handy Femida
Publication year - 1997
Publication title -
annals of public and cooperative economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.526
H-Index - 37
eISSN - 1467-8292
pISSN - 1370-4788
DOI - 10.1111/1467-8292.00043
Subject(s) - market failure , government (linguistics) , private sector , business , public sector , profit (economics) , nonprofit organization , economics , industrial organization , microeconomics , public administration , economic growth , economy , political science , linguistics , philosophy
If nonprofit organizations are superior institutions in resolving informational asymmetry and resulting contract failure, why do nonprofit (NPs), for‐profit (FPs) and government/public institutions (GPs) survive in the same industry? This article explicitly models the nonconvex budget set for the consumer that arises through the juxtaposition of the inefficiencies and contract failures that occur in the three sectors. Because the consumer is willing to trade quality for efficiency and price, varying market shares for NPs, FPs and GPs can exist in the same industry. The theory offered complements the functionalist explanation of the existence of nonprofits advanced by Weisbrod and Hansmann using a micro‐analysis.