This paper derives the decision to found a nonprofit firm as the equilibrium outcome of a multistage game among individuals who would like a public good to be provided. The model predicts that if individuals will voluntarily contribute towards provision of the public good, then it is in the private interest of the entrepreneur to impose a non-distribution constraint on herself by founding a nonprofit firm. This decision also results in greater voluntary contributions than if the firm is proprietary.
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Length: 33 pages Date of creation: 1997 Date of revision: Handle: RePEc:uwo:uwowop:9709
Contact details of provider: Postal: Department of Economics, Reference Centre, Social Science Centre, University of Western Ontario, London, Ontario, Canada N6A 5C2 Phone: 519-661-2111 Ext.85228 Web page: http://economics.uwo.ca/econref/WorkingPapers/
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Find related papers by JEL classification: D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Boundaries of Public and Private Enterprise; Privatization; Contracting Out H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
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