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THE NONPROFIT FIRM: A POTENTIAL SOLUTION TO INHERENT MARKET FAILURES
Author(s) -
Preston Anne E.
Publication year - 1988
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1988.tb01511.x
Subject(s) - economics , microeconomics , profit (economics) , pareto principle , public good , social welfare , product (mathematics) , product market , welfare , set (abstract data type) , nonprofit sector , business , industrial organization , market economy , operations management , programming language , geometry , mathematics , public relations , incentive , political science , computer science , law
This article analyzes the differences in products offered by nonprofit and for‐profit firms in a monopolistically competitive industry where goods are differentiated both by product attributes and by the degree to which benefits are public. Because nonprofit firms receive donations, they provide a Pareto improvement of the equilibrium product set: nonprofit firms will be less biased against goods with a high social good component than will their for‐profit counterparts, hi addition, the optimal donations function which equates the nonprofit equilibrium product set to the set which maximizes societal welfare is derived.