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Mixed Competition and Welfare under Various Nonprofit Objectives Mixed Competition under Various Cost Configurations

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  • Petra Brhlikova

Abstract

I study the competition between one nonprofit and one for-profit firm under various objective functions of the nonprofit firm. The two firms optimize their objectives with respect to quality and price of their products. The nonprofit firm serves one-half of the market under pure quality maximization, while it serves about twothirds under two other objective functions that in addition to quality, include market share. In contrast, the market share and profit of the for-profit firm decrease, and consumer and total surplus increase. For the case of quality maximization pursued by the nonprofit firm, I derive equilibria for several cost configurations. Qualities and prices offered depend on the steepness of the cost function as well as on the proportion between fixed and variable costs.

Suggested Citation

  • 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.
  • Handle: RePEc:cer:papers:wp310
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    File URL: http://www.cerge-ei.cz/pdf/wp/Wp310.pdf
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    References listed on IDEAS

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    1. Richard Steinberg, 1986. "The Revealed Objective Functions of Nonprofit Firms," RAND Journal of Economics, The RAND Corporation, vol. 17(4), pages 508-526, Winter.
    2. 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.
    3. Daniel Friesner & Robert Rosenman, 2001. "The Property Rights Theory of the Firm and Mixed Competition: A Counter-Example in the US Health Care Industry," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 8(3), pages 437-450.
    4. Shaked, Avner & Sutton, John, 1983. "Natural Oligopolies," Econometrica, Econometric Society, vol. 51(5), pages 1469-1483, September.
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    More about this item

    Keywords

    Nonprofit; For-profit; Competition;

    JEL classification:

    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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