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The Effect of the Nonprofit Motive on Hospital Competitive Behavior


  • Harrison Teresa D.

    () (Drexel University)

  • Lybecker Kristina M.

    () (Drexel University)


In this paper, we employ three simple theoretical models of nonprofit hospitals to investigate equilibrium behavior when hospitals compete. Utilizing a differentiated Bertrand model, we examine how prices, quantity of patients served, service to the uninsured, and quality of care are affected as nonprofits place more weight on profit maximization. We find that the specification of the nonprofit motive greatly impacts the results. When the nonprofit motive is maximizing output, prices rise for both hospitals as the nonprofit moves away from its nonprofit motive. However, if the nonprofit cares about serving the uninsured, prices in the market fall. Finally, when hospitals compete on price and quality, more emphasis on profits results in an increase in price at the for-profit hospital and a decrease in price at the nonprofit hospital. These results suggest that the importance of the nonprofit motive has been underestimated and should be further investigated.

Suggested Citation

  • Harrison Teresa D. & Lybecker Kristina M., 2005. "The Effect of the Nonprofit Motive on Hospital Competitive Behavior," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 4(1), pages 1-17, May.
  • Handle: RePEc:bpj:bejeap:v:contributions.4:y:2005:i:1:n:3

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    Cited by:

    1. Kurt R. Brekke & Luigi Siciliani & Odd Rune Straume, 2011. "Hospital Competition and Quality with Regulated Prices," Scandinavian Journal of Economics, Wiley Blackwell, vol. 113, pages 444-469, June.
    2. Natalie Privett & Feryal Erhun, 2011. "Efficient Funding: Auditing in the Nonprofit Sector," Manufacturing & Service Operations Management, INFORMS, vol. 13(4), pages 471-488, October.
    3. Guccio, Calogero & Lisi, Domenico & Pignataro, Giacomo, 2014. "Readmission and Hospital Quality under Prospective Payment System," MPRA Paper 56490, University Library of Munich, Germany.
    4. Adam D. Rennhoff & Mark F. Owens, 2012. "Competition and the Strategic Choices of Churches," American Economic Journal: Microeconomics, American Economic Association, vol. 4(3), pages 152-170, August.
    5. Petra Brhlikova & Andeas Ortmann, 2006. "The Impact of the Non-distribution Constraint and Its Enforcement on Entrepreneurial Choice, Price, and Quality," CERGE-EI Working Papers wp299, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    6. Christopher Hoag & Kamal Lamsal, 2014. "Nonprofit Firms in a Linear City with Nonnegative Profits," Working Papers 1403, Trinity College, Department of Economics.
    7. Tomáš Rosenmayer, 2015. "The Study of Mix-form Markets in the Context of Economic Theories of Nonprofit Organizations," Ekonomika a Management, University of Economics, Prague, vol. 2015(3).
    8. Petra Brhlikova, 2006. "Mixed Competition and Welfare under Various Nonprofit Objectives Mixed Competition under Various Cost Configurations," CERGE-EI Working Papers wp310, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    9. Alvaro S Almeida, 2016. "The Role Of Private Non-Profit Healthcare Organizations In Nhs Systems: Implications For The Portuguese Hospital Devolution Program," FEP Working Papers 577, Universidade do Porto, Faculdade de Economia do Porto.
    10. Edgar Alan N. Rayo, 2012. "Institutional isomorphism among nonprofits in cause marketing partnerships," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 15(46bis), pages 121-136, December.

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