Quality, Reputation and the Choice of Organizational Form

Michael Vlassopoulos

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Abstract: This paper revisits the hypothesis that nonprofit organizations emerge in markets that are characterized by contractual incompleteness because they ensure consumers against opportunistic behavior. We extend the Glaeser and Shleifer (2001) framework which studies an entrepreneur's optimal choice of organizational form and service quality when quality is non-contractible into a repeated interaction setting. The main result is that when reputations can be sustained, then for-profit status is the preferred organizational form and high quality services are ensured. This finding suggests that existing explanations of nonprofit organizations that focus entirely on contractual imperfections in the producer/consumer relationship may be inadequate.

Keywords: L14; L30; Nonprofit Status; Reputation; Contractual Incompleteness (search for similar items in EconPapers)
Date: 2009-03-09
Note: View the original document on HAL open archive server: https://hal.science/hal-00677623
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Citations: View citations in EconPapers (6)

Published in Journal of Economic Behavior and Organization, 2009, 71 (2), pp.515. ⟨10.1016/j.jebo.2009.02.014⟩

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Journal Article: Quality, reputation and the choice of organizational form (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00677623

DOI: 10.1016/j.jebo.2009.02.014

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