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The Profit-maximizing Non-profit

Author

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  • Amihai Glazer

    (Department of Economics, University of California-Irvine)

Abstract

Consider an organization that solicits private contributions, which will partly be used to provide a public good. The organization's goals is to maximize its profits, namely the difference between aggregate contributions and the amount it spends on providing the public good. An equilibrium exists in which many persons contribute, each contributor enjoys zero consumer surplus from contributing, and the organization takes as a profit the contributions of all but one donor. Such behavior by the organization is consistent with incomplete crowding out of governmental grants. Furthermore, when the organization is constrained to spend at least fraction of all contributions on the public good, it can have an incentive to produce inefficiently.

Suggested Citation

  • Amihai Glazer, 2014. "The Profit-maximizing Non-profit," Working Papers 131404, University of California-Irvine, Department of Economics.
    • Handle: RePEc:irv:wpaper:131404
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    File URL: https://www.economics.uci.edu/files/docs/workingpapers/2013-14/glazer-04.pdf
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    References listed on IDEAS

    as
    1. Palfrey, Thomas R. & Rosenthal, Howard, 1984. "Participation and the provision of discrete public goods: a strategic analysis," Journal of Public Economics, Elsevier, vol. 24(2), pages 171-193, July.
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    5. Warr, Peter G., 1982. "Pareto optimal redistribution and private charity," Journal of Public Economics, Elsevier, vol. 19(1), pages 131-138, October.
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    7. Mark Bagnoli & Barton L. Lipman, 1989. "Provision of Public Goods: Fully Implementing the Core through Private Contributions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 56(4), pages 583-601.
    8. Andreoni, James, 1989. "Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1447-1458, December.
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    Cited by:

    1. Bruns, Christian & Himmler, Oliver, 2016. "Mass media, instrumental information, and electoral accountability," Journal of Public Economics, Elsevier, vol. 134(C), pages 75-84.

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    More about this item

    Keywords

    Non-profit; Public good; Private provision; Philanthropy;
    All these keywords.

    JEL classification:

    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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