DO NOT-FOR-PROFIT ORGANIZATIONS MEET A DEMAND FOR TRUST GOODS ? A REAPPRAISAL OF THE CONTRACT FAILURE THEORY

RESOUDRE UN PROBLEME D’ASYMETRIE D’INFORMATION EN S’ABSTENANT DE FAIRE DU PROFIT: LES ORGANISATIONS SANS BUT LUCRATIF REPONDENT-ELLES A UNE DEMANDE DE BIENS DE CONFIANCE ?

Erwan Queinnec

Working Papers from HAL

Abstract: Contract Failure Theory (CFT) argues that the Non Distribution Constraint prototypical of Non Profit Organizations (NPOs) plays the role of a safeguard given to buyers of "trust goods", the latter of which involving dramatic asymmetrical information. Although stimulating, such a paradigm stumbles over the coexistence of firms and commercial NPOs on markets for nursing, medical services and education. Thus, it calls for further discussion in order to study its premises and prescriptions more closely. Existing literature obviously helps to achieve such an analytical project although it does not always specify the type of good –nor the type of consumer- CFT should the more rigorously be applied to. Therefore, our paper is willing to (a) identify the contractual problems specifically attached to trust goods, (b) sketch conditions making for profit provision of trust goods viable and (c) figure out devices complementary to non profit status that could emphasise the competitive advantage of commercial NPOs. It concludes that non profit status signals a specific ability to deal with the distorted rationality of some consumers rather than resolving an overall "contract failure" rooted in a general problem of asymmetrical information.

Keywords: contract failure; asymmetrical information; Non Profit Organizations; trust goods (search for similar items in EconPapers)
Date: 2011-11-25
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