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Entry and fixed costs in charitable sectors

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  • Scharf, Kimberley

Abstract

Fixed costs that are not sunk do not translate into entry barriers against for-profit competitors. We show that in the case of non-commercial, not- for-profit providers, the presence of fixed costs may protect the position of an inefficient incumbent. In these situations, successfully contesting the position of incumbents may require new providers to adopt a for- profit organizational form – notwithstanding the moral hazard problem that this might entail when quality of provision is difficult to monitor – or, alternatively, to secure core funding from government or from a large private donor.

Suggested Citation

  • Scharf, Kimberley, 2010. "Entry and fixed costs in charitable sectors," CEPR Discussion Papers 7978, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:7978
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    References listed on IDEAS

    as
    1. Lakdawalla, Darius & Philipson, Tomas, 2006. "The nonprofit sector and industry performance," Journal of Public Economics, Elsevier, vol. 90(8-9), pages 1681-1698, September.
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    More about this item

    Keywords

    Charities; core funding; not-for-profit organizations;

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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