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Competition in public service provision: The role of not-for-profit providers

Timothy Besley () and James Malcomson ()

Journal of Public Economics, 2018, vol. 162, issue C, 158-172

Abstract: With public services such as health and education, it is not straightforward for consumers to assess the quality of provision. Many such services are provided by monopoly not-for-profit providers and there is concern that for-profit providers may increase profit at the expense of quality. This paper explores the implications of entry by for-profit providers when there is unobserved quality. The model generates three key policy-relevant insights. First, by developing a novel approach to competition between different organizational forms, it frames the relevant trade-offs precisely. Second, it shows the value of keeping an incumbent not-for-profit as an active provider. Third, it characterizes the optimal payment (or voucher value) to an entrant for each consumer who switches in a way that can be applied empirically.

Keywords: Public services; Competition; Not-for-profit providers (search for similar items in EconPapers)
JEL-codes: H11 H44 L21 L31 (search for similar items in EconPapers)
Date: 2018
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Working Paper: Competition in Public Service Provision: The Role of Not-for-profit Providers (2017) Downloads
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