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Scale Economies in Nonprofit Provision, Technology Adoption and Entry

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  • Scharf, Kimberley

Abstract

We study competition between nonprofit providers supplying a collective service through increasing-returns-to-scale technologies. When providers adopt a not-for-profit mission, the absence of a residual claimant can impede entry, pro- tecting the position of an inefficient incumbent. Moreover, when the goods provided are at least partly public in nature, buyers face individual incentives to divert donations towards providers that adopt low-fixed cost technologies, and so providers may forgo the adoption of more efficient technologies that require fixed costs. In these situations, government grants in support of core costs can have a non-neutral effect on entry, technology adoption, and industry performance.

Suggested Citation

  • Scharf, Kimberley, 2011. "Scale Economies in Nonprofit Provision, Technology Adoption and Entry," CEPR Discussion Papers 8606, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:8606
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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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    Cited by:

    1. Scharf, Kimberley & Tukiainen, Janne, 2015. "Does Market Size Matter Also for Charities?," CAGE Online Working Paper Series 226, Competitive Advantage in the Global Economy (CAGE).

    More about this item

    Keywords

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

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L3 - Industrial Organization - - Nonprofit Organizations and Public Enterprise

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