Entry and fixed costs in charitable sectors

Kimberley Scharf

No 7978, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Fixed costs that are not sunk do not translate into entry barriers against for-profit competitors. We show that in the case of non-commercial, not- for-profit providers, the presence of fixed costs may protect the position of an inefficient incumbent. In these situations, successfully contesting the position of incumbents may require new providers to adopt a for- profit organizational form ? notwithstanding the moral hazard problem that this might entail when quality of provision is difficult to monitor ? or, alternatively, to secure core funding from government or from a large private donor.

Keywords: Charities; Not-for-profit organizations; Core funding (search for similar items in EconPapers)
JEL-codes: L1 (search for similar items in EconPapers)
Date: 2010-09
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