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Nondistribution Constraint and Managerial Discretion: Disentangling the Relationship

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  • Vladislav Valentinov

Abstract

The paper questions the viewpoint of the property rights theorists that nondistribution constraint makes nonprofit firms particularly prone to managerial shirking. The possibility that utility maximized by nonprofit managers corresponds to their firms’ missions is justified by the inability of the real-world price system to ensure the perfect match between profit maximization and utility maximization. The imperfection of this match means that some consumers’ preferences cannot be gratified through the price system and therefore require nonprofit organization. The possibility of managerial on-the-job consumption in nonprofit firms is shown to be insufficient for inferring inefficiency of their property rights structure. Copyright Springer Science + Business Media, Inc. 2006

Suggested Citation

  • Vladislav Valentinov, 2006. "Nondistribution Constraint and Managerial Discretion: Disentangling the Relationship," Public Organization Review, Springer, vol. 6(4), pages 305-316, December.
    • Handle: RePEc:kap:porgrv:v:6:y:2006:i:4:p:305-316
    DOI: 10.1007/s11115-006-0006-z
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    1. Alchian, Armen A & Demsetz, Harold, 1972. "Production , Information Costs, and Economic Organization," American Economic Review, American Economic Association, vol. 62(5), pages 777-795, December.
    2. Furubotn, Eirik G & Pejovich, Svetozar, 1972. "Property Rights and Economic Theory: A Survey of Recent Literature," Journal of Economic Literature, American Economic Association, vol. 10(4), pages 1137-1162, December.
    3. Eggertsson,Thrainn, 1990. "Economic Behavior and Institutions," Cambridge Books, Cambridge University Press, number 9780521348911.
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