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Competition in Public Service Provision: The Role of Not-for-profit Providers

Timothy Besley () and James Malcomson ()

No 6759, CESifo Working Paper Series from CESifo

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 whether entry by for-profit providers is good for consumers despite the problem of 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: 2017
New Economics Papers: this item is included in nep-com and nep-mic
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Related works:
Journal Article: Competition in public service provision: The role of not-for-profit providers (2018) Downloads
Working Paper: Competition in public service provision: the role of not-for-profit providers (2018) Downloads
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