Quality, Reputation and the Choice of Organizational Form
This paper revisits the hypothesis that nonprofit organizations emerge in markets that are characterized by contractual incompleteness because they ensure consumers against opportunistic behavior. We extend the Glaeser and Shleifer (2001) framework which studies an entrepreneur's optimal choice of organizational form and service quality when quality is non-contractible into a repeated interaction setting. The main result is that when reputations can be sustained, then for-profit status is the preferred organizational form and high quality services are ensured. This finding suggests that existing explanations of nonprofit organizations that focus entirely on contractual imperfections in the producer/consumer relationship may be inadequate.
|Date of creation:||09 Mar 2009|
|Publication status:||Published in Journal of Economic Behavior & Organization, 2009, 71 (2), pp.515. <10.1016/j.jebo.2009.02.014>|
|Note:||View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00677623|
|Contact details of provider:|| Web page: https://hal.archives-ouvertes.fr/|
References listed on IDEAS
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