The Nonprofit Firm: A Potential Solution to Inherent Market Failures

Anne E Preston

Economic Inquiry, 1988, vol. 26, issue 3, 493-506

Abstract: This article analyzes the differences in products offered by nonpro fit 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 co unterparts. In addition, the optimal donations function that equates the nonprofit equilibrium product set to the set that maximizes societal welfare is derived. Copyright 1988 by Oxford University Press.

Date: 1988
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