Competition and Performance in the Marketplace for Religion: A Theoretical Perspective

This paper, which contributes to the literature that rigorously models religious markets, offers a theoretical framework that incorporates demand and supply sides. The model can accommodate Adam Smith’s view that competition may possibly improve on monopoly’s performance and also David Hume’s opposite view that, because the clergy have an incentive to distort the message of religion, monopoly might possibly improve on competition. Impacts on religiosity of greater diversity and of increased competition in the marketplace for religion are isolated. It is shown that while greater diversity benefits the devout (as claimed by “supply-side” theorists), increased competition dilutes spiritual standards by encouraging monetary donations at the expense of genuine piety. These opposing effects of diversity and competition help reconcile apparently contradictory empirical findings on the American religious market and also those suggesting European “exceptionalism.”