Non-Profit Firms and the Provision of Durable Goods

Gregory E. Goering

Departmental Working Papers from Department of Economics, Louisiana State University

Abstract: A simple linear demand two-period durable goods is analyzed where the durable good is provided by private non-profit organization (NPO). A novel flexible objective function is utilized that allows for both the �commercial� and �social concern� aspects of NPOs. The model indicates NPO�s will not typically provide the efficient cost-minimizing durability in sales markets. Indeed, if the NPO cannot credibly commit to its own stakeholders it will manufacture output with less durability than a pure for-profit seller. We show the NPO�s level of commitment ability and social concern with its stakeholders is crucial for determining the amount of �planned obsolescence� that would prevail if NPOs expand into durable goods markets. Interestingly, the social concern commonly cited for the existence of NPOs, is a double edged sword since it may cause more or less product obsolescence.

Date: 2006-12
New Economics Papers: this item is included in nep-mic and nep-soc
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Persistent link: https://EconPapers.repec.org/RePEc:lsu:lsuwpp:2006-16

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