This study examines duopoly price competition between a for-profit firm and a nonprofit organization. It shows that the competitive outcome is predominantly the consequence of their different objective functions. The damage to the for-profit caused by the nonprofit's policy and regulatory advantages is only marginal. Moreover, the for-profit can protect itself by acquiring Stackelberg price leadership.
Get full access to this article
View all access options for this article.
References
1.
AdizesIchak (1975), “The Cost of Being a Artist,”California Management Review, 27(4), 80–84.
2.
AndreasenAlan R. (1994), “Social Marketing: Its Definition and Domain,”Journal of Public Policy & Marketing, 13(Spring), 108–114.
3.
AndreasenAlan R. (2001), “Intersector Transfer of Marketing Knowledge,” in Handbook of Marketing and Society, PaulN. Bloom, and GundlachGregory T., eds. Thousand Oaks, CA: Sage Publications, 80–104.
4.
AndreasenAlan R. (2002), “Marketing Social Marketing in the Social Change Marketplace,”Journal of Public Policy & Marketing, 21(Spring), 3–13.
5.
BarnesN. (1994), “Cause-Related Marketing Revisited: The Effects of The United Way Scandal,”American Business Review, 12(2), 95–99.
6.
BeatoP., and Mas-ColellA. (1984), “The Marginal Cost Pricing as a Regulation Mechanism in Mixed Markets,” in The Performance of Public Enterprises, MarchandMaurice, PestieauPierre, and TulkensHenry, eds. Amsterdam: North-Holland, 81–100.
7.
BennettJames T., and DiLorenzoThomas J. (1989), Unfair Competition: The Profits of Nonprofits.Lanham, MD: Hamilton Press.
8.
BlaisAndré, and DionStéphanie (1990), “Are Bureaucrats Budget Maximizers? The Niskanen Model and Its Critics,”Polity, 22(4), 655–74.
9.
BösDieter (1986), Public Enterprise Economics.Amsterdam: North-Holland.
10.
BulowJeremy I., GeanakoplosJohn D., and KlempererPaul D. (1985), “Multimarket Oligopoly: Strategic Substitutes and Complements,”Journal of Political Economy, 93(3), 488–511.
11.
CremerHelmuth, MarchandMaurice, and ThisseJacques-François (1989), “The Public Firm as an Instrument for Regulating an Oligopolistic Market,”Oxford Economic Papers, 41(2), 283–301.
12.
DartRaymond, and ZimmermanBrenda (2000), “After Government Cuts: Insights from Two Ontario ‘Enterprising Nonprofits,’” in The Nonprofit Sector in Canada, BantingK., ed. Kingston, ON: Queen's University School of Policy Studies, 107–148.
13.
DeesJ. Gregory (1998), “Enterprising Nonprofits,”Harvard Business Review, 76(1), 55–67.
14.
FarringtonGregory C. (1999), “The New Technologies and the Future of Residential Undergraduate Education,” in Dancing with the Devil: Information Technology and the New Competition in Higher Education, RichardN. Katz, eds. San Francisco: Jossey-Bass, 73–94.
15.
GallagherKatherine, and WeinbergCharles (1991), “Coping with Success: New Challenges for Nonprofit Marketing,”Sloan Management Review, 33(Fall), 27–42.
16.
GapinskiJames H. (1984), “The Economics of Performing Shakespeare,”American Economic Review, 74(3), 458–66.
17.
JacobsPhilip, and WilderRonald P. (1984), “Pricing Behavior of Nonprofit Agencies,”Journal of Health Economics, 3(1), 49–61.
18.
KwokaJohn E. (2002), “Governance Alternatives and Pricing in the U.S. Electric Power Industry,”Journal of Law, Economics, and Organization, 18(1), 278–94.
19.
LowryRobert C. (1997), “The Private Production of Public Goods: Organizational Maintenance, Manager's Objectives, and Collective Goals,”American Political Science Review, 91(2), 308–323.
20.
MahajanVijay, and VenkateshR. (2000), “Marketing Modeling for E-Business,”International Journal Research in Marketing, 17(2-3), 215–25.
21.
MerlissPenny Pittmann, and LovelockChristopher H. (1980), “American Repertory Theatre,” Case No. 9-580-133, Harvard University.
NetzJanet S. (1999), “Non-Profits and Price-Fixing: The Case of the Ivy League,” working paper, Department of Economics, Purdue University.
24.
OlsonMancur (1971), The Logic of Collective Action: Public Goods and the Theory of Groups.Cambridge, MA: Harvard University Press.
25.
PiresSheila (1985), Competition Between the Nonprofit and For-Profit Sectors: A Special Report.Washington, DC: The National Assembly of National Voluntary Health and Social Welfare Organizations.
26.
PorterMichael E. (1980), Competitive Strategy: Techniques for Analyzing Industries and Competitors.New York: The Free Press.
27.
RajuJagmohan S., SethuramanRaj, and DharSanjay K. (1995), “The Introduction and Performance of Store Brands,”Management Science, 41(6), 957–78.
28.
ReesRay (1984), Public Enterprise Economics, 2d ed. London: Wenfeld and Nicholson.
29.
Rose-AckermanSusan (1987), “Ideals Versus Dollars: Donors, Charity Managers, and Government Grants,”Journal of Political Economy, 95(4), 810–23.
30.
Rose-AckermanSusan (1990), “Competition Between Non-Profits and For-Profits: Entry and Growth,”Voluntas, 1(1), 13–25.
31.
Rose-AckermanSusan (1996), “Altruism, Nonprofits, and Economic Theory,”Journal of Economic Literature, 34(June), 701–728.
32.
SalamonLester M., and AnheierHelmut K. (1998), “The Third Route: Government–Nonprofit Collaboration in Germany and the United States,” in Private Action and the Public Good, PowellW., and ClemensE., eds. New Haven, CT: Yale University Press, 151–62.
33.
SchiffJerald, and WeisbrodBurton (1993), “Competition Between For-Profit and Nonprofit Organizations in Commercial Markets,” in The Nonprofit Sector in the Mixed Economy, Ben-NerAvner, and GuiBenedetto, eds. Ann Arbor: University of Michigan Press, 127–47.
34.
SchlesingerMark (1998), “Mismeasuring the Consequences of Ownership: External Influences and the Comparative Performance of Public, For-Profit, and Private Nonprofit Organizations,” in Private Action and the Public Good, PowellW., and ClemensE., eds. New Haven, CT: Yale University Press, 85–113.
35.
ShubikMartin, and LevitanRichard E. (1980), Market Structure and Behavior.Cambridge, MA: Harvard University Press.
36.
SteinbergRichard (1986), “The Revealed Objective Functions of Nonprofit Firms,”RAND Journal of Economics, 17(Winter), 508–526.
37.
TiroleJean (1998), The Theory of Industrial Organization.Cambridge: Massachusetts Institute of Technology Press.
38.
TuckmanHoward P. (1998), “Competition, Commercialization, and the Evolution of Nonprofit Organizational Structures,” in To Profit or Not to Profit, WeisbrodBurton, ed. Cambridge, UK: Cambridge University Press, 25–46.
39.
U.S. General Accounting Office (1987), Competition Between Taxable Businesses and Tax-Exempt Organizations.Washington, DC: U.S. General Accounting Office.
40.
U.S. Small Business Administration (1983), Unfair Competition by Nonprofit Organizations with Small Business: An Issue for the 1980s.Washington, DC: U.S. Small Business Administration.
41.
VickersJohn, and YarrowGeorge (1988), Privatization: An Economic Analysis.Cambridge: Massachusetts Institute of Technology Press.
42.
VossGlenn B., CableDaniel M., and VossZannie Giraud (2000), “Linking Organizational Values to Relationships with External Constituents: A Study of Nonprofit Professional Theatres,”Organization Science, 11(3), 330–47.
43.
WeinbergCharles (1980), “Marketing Mix Decisions for Nonprofit Organizations: An Analytical Approach,”Research in Marketing, 3, 261–69.
44.
WeisbrodBurton (1988), The Nonprofit Economy.Cambridge, MA: Harvard University Press.
45.
WeisbrodBurton (1998), “Institutional Form and Organizational Behavior,” in Private Action and the Public Good, PowellW., and ClemensE., eds. New Haven, CT: Yale University Press, 69–84.