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Antitrust and the Not-For-Profit Sector

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  • Tomas J. Philipson
  • Richard A. Posner

Abstract

Although the not-for-profit sector contributes greatly to aggregate output in many industries, there is little explicit analysis of the consequences of applying antitrust policy in this sector. This paper argues that the same incentives to collude exist in the non-profit sector as in the for-profit sector and that therefore, since competition is socially valuable regardless of the particular objectives of producers, the fact that antitrust law does not distinguish between the two sectors is efficient. The similarity in incentives derives from the fact that altruistic firms benefit from exploiting market power even when they would price below cost without regard to competition. Although the legal regulations governing the nonprofit sector limit the degree to which profits can be distributed, and therefore seek to reduce rents in a similar manner to antitrust laws, this nondistribution constraint does not obviate the need for antitrust in that sector. The argument for uniform antitrust doctrine in the two sectors extends to the exemptions from antitrust as well. In particular, patents (lawful monopolies intended to create incentives for innovation) stimulate innovation in the nonprofit sector only when they enable market power to be exploited, just as in the for-profit sector, and so the patent exemption from antitrust should be as broad in the nonprofit sector.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8126.

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Date of creation: Feb 2001
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Handle: RePEc:nbr:nberwo:8126

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  1. Ordover, Janusz A. & Saloner, Garth, 1989. "Predation, monopolization, and antitrust," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 9, pages 537-596 Elsevier.
  2. Gaynor, Martin & Vogt, William B, 2003. " Competition among Hospitals," RAND Journal of Economics, The RAND Corporation, vol. 34(4), pages 764-85, Winter.
  3. Lynk, William J, 1995. "Nonprofit Hospital Mergers and the Exercise of Market Power," Journal of Law and Economics, University of Chicago Press, vol. 38(2), pages 437-61, October.
  4. Lynk, William J. & Neumann, Lynette R., 1999. "Price and profit," Journal of Health Economics, Elsevier, vol. 18(1), pages 99-116, January.
  5. Anup Malani & Tomas Philipson & Guy David, 2003. "Theories of Firm Behavior in the Nonprofit Sector. A Synthesis and Empirical Evaluation," NBER Chapters, in: The Governance of Not-for-Profit Organizations, pages 181-216 National Bureau of Economic Research, Inc.
  6. Gruber, Jonathan, 1994. "The effect of competitive pressure on charity: Hospital responses to price shopping in California," Journal of Health Economics, Elsevier, vol. 13(2), pages 183-211, July.
  7. Dranove, David & Ludwick, Richard, 1999. "Competition and pricing by nonprofit hospitals: a reassessment of Lynk's analysis," Journal of Health Economics, Elsevier, vol. 18(1), pages 87-98, January.
  8. Gaynor, Martin & Vogt, William B., 2000. "Antitrust and competition in health care markets," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 27, pages 1405-1487 Elsevier.
  9. John Simpson & Richard Shin, 1998. "Do Nonprofit Hospitals Exercise Market Power?," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 5(2), pages 141-157.
  10. Keeler, Emmett B. & Melnick, Glenn & Zwanziger, Jack, 1999. "The changing effects of competition on non-profit and for-profit hospital pricing behavior," Journal of Health Economics, Elsevier, vol. 18(1), pages 69-86, January.
  11. Daniel P. Kessler & Mark B. McClellan, 1999. "Is Hospital Competition Socially Wasteful?," NBER Working Papers 7266, National Bureau of Economic Research, Inc.
  12. Lakdawalla, Darius & Philipson, Tomas, 2006. "The nonprofit sector and industry performance," Journal of Public Economics, Elsevier, vol. 90(8-9), pages 1681-1698, September.
  13. Sloan, Frank A. & Picone, Gabriel A. & TaylorJr., Donald H. & Chou, Shin-Yi, 2001. "Hospital ownership and cost and quality of care: is there a dime's worth of difference?," Journal of Health Economics, Elsevier, vol. 20(1), pages 1-21, January.
  14. W. Kip Viscusi & Joseph E. Harrington & John M. Vernon, 2005. "Economics of Regulation and Antitrust, 4th Edition," MIT Press Books, The MIT Press, edition 4, volume 1, number 026222075x, January.
  15. Jacquemin, Alexis & Slade, Margaret E., 1989. "Cartels, collusion, and horizontal merger," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 7, pages 415-473 Elsevier.
  16. Dennis W. Carlton & Gustavo E. Bamberger & Roy J. Epstein, 1994. "Antitrust and Higher Education," University of Chicago - George G. Stigler Center for Study of Economy and State 107, Chicago - Center for Study of Economy and State.
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Citations

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Cited by:
  1. Annika Frohloff, 2007. "Cost and Technical Efficiency of German Hospitals – A Stochastic Frontier Analysis," Ruhr Economic Papers 0002, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  2. Katalin Katona & Marcel Canoy, 2013. "Welfare standards in hospital mergers," The European Journal of Health Economics, Springer, vol. 14(4), pages 573-586, August.
  3. Nikolaus Fink, 2011. "SSNIP, state-owned enterprises, public goods and complements," Empirica, Springer, vol. 38(3), pages 381-388, July.
  4. Blanchflower, David G; Oswald, Andrew, 2011. "Antidepressants and Age," CAGE Online Working Paper Series 44, Competitive Advantage in the Global Economy (CAGE).
  5. Lakdawalla, Darius & Philipson, Tomas, 2006. "The nonprofit sector and industry performance," Journal of Public Economics, Elsevier, vol. 90(8-9), pages 1681-1698, September.
  6. Jill R. Horwitz & Austin Nichols, 2007. "What Do Nonprofits Maximize? Nonprofit Hospital Service Provision and Market Ownership Mix," NBER Working Papers 13246, National Bureau of Economic Research, Inc.
  7. Joseph Farrell & Paul Pautler & Michael Vita, 2009. "Economics at the FTC: Retrospective Merger Analysis with a Focus on Hospitals," Review of Industrial Organization, Springer, vol. 35(4), pages 369-385, December.
  8. Francisco Marcos & Juan Santalo, 2007. "Tomb price discrimination in cemeteries: competition in the market for corpses?," Working Papers Economia wp07-09, Instituto de Empresa, Area of Economic Environment.
  9. David Sappington & J. Sidak, 2003. "Incentives for Anticompetitive Behavior by Public Enterprises," Review of Industrial Organization, Springer, vol. 22(3), pages 183-206, May.
  10. Johan Willner, 2013. "The welfare impact of a managerial oligopoly with an altruistic firm," Journal of Economics, Springer, vol. 109(2), pages 97-115, June.
  11. Johan Willner, 2010. "Public Options and Altruistic Firms - Antitrust Targets or Tools? The Welfare Impact of a Mixed Oligopoly With Managerial firms," Discussion Papers 59, Aboa Centre for Economics.
  12. Annika Herr, 2008. "Cost and technical efficiency of German hospitals: does ownership matter?," Health Economics, John Wiley & Sons, Ltd., vol. 17(9), pages 1057-1071.

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