IDEAS home Printed from
   My bibliography  Save this paper

The efficiency of the non-profit enterprise: constitutional ideology, conformist preferences and reputation



According to one thesis the non profit enterprise (in short NPE) is able to attract ideological entrepreneurs and workers (Rose-Ackerman 1996). In fact I prove that without the ideological element, a simple game between the entrepreneur, worker and beneficiary is condemned to an opportunistic equilibrium, beneficial to the internal members of the organization but detrimental to the beneficiary. Thus the NPE does not better than its for profit counterpart. In my model ideologues, both entrepreneurs and workers, share a principle of justice seen as the constitutional ideology of the NPE, agreed upon in an hypothetical ex ante bargaining game. The constitutional principle provides an independent source of motivation (a source of utility) of the players, in so far as they believe in the reciprocity of conformity to the ideology by all the participants. I call this conformity-based utility “ideological”, and I see it as the representation of a preference for expected conformity to the given constitutional principle. The philosophical underpinnings of this reform of the players' utility functions in worked out by distinguishing two concepts of preferences of the Self: consequentialist preferences and conformist preferences. The latter are preferences for those actions that are part of states of affairs described in terms of interdependent actions conforming to an abstract norm or principle, which become effective once the preferences' holder does expect that the other players do they part in that state of affairs and they do expect that himself do his part in the same state of affairs. What result is that a player's ideological utility depends on the expectation of deontological modes of behaviour followed by all the participants, himself included. On this basis it is possible to overcome personal incentives to embrace opportunistic behaviour, so that the proper Non-profit Enterprise emerges. It is proved that in the “social enterprise game” amongst the member of the organisation there exists an organisational equilibrium minimising transaction costs to the beneficiaries. At last, this equilibrium rests on the emergence of an expectations system of reciprocal conformity to the constitutional ideology. As the existence - not even the selection – of the internal organizational equilibrium rests heavily on the existence of the appropriate system of reciprocal expectation, the problem of how we can justify the emergence of the appropriate system of beliefs must be underlined. Here is where the explicit moral codes of the NPE enters the scene. I see the code of ethics as the building block for deriving a reputation equilibrium between the NPE as a whole and its external stakeholders within a repeated game, whose stage-game is the typical game of trust played under incomplete knowledge and unforeseen contingencies. At last the conformist-motivation model and the reputation model under unforeseen contingencies are shown to play together in a mutually supporting explanation of the efficiency of the NPE.

Suggested Citation

  • Lorenzo Sacconi, 2002. "The efficiency of the non-profit enterprise: constitutional ideology, conformist preferences and reputation," LIUC Papers in Ethics, Law and Economics 110, Cattaneo University (LIUC).
  • Handle: RePEc:liu:liuced:110

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Lorenzo Sacconi & Stefano Moretti, 2002. "Fuzzy norms, default reasoning and equilibrium selection in games under unforeseen contingencies and incomplete knowledge," LIUC Papers in Ethics, Law and Economics 104, Cattaneo University (LIUC).
    2. Kreps, David M. & Milgrom, Paul & Roberts, John & Wilson, Robert, 1982. "Rational cooperation in the finitely repeated prisoners' dilemma," Journal of Economic Theory, Elsevier, vol. 27(2), pages 245-252, August.
    3. Oliver Hart & John Moore, 1999. "Foundations of Incomplete Contracts," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 115-138.
    4. repec:wsi:wschap:9789812818478_0007 is not listed on IDEAS
    5. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
    6. Eric Maskin & Jean Tirole, 1999. "Unforeseen Contingencies and Incomplete Contracts," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 83-114.
    7. Rose-Ackerman, Susan, 1987. "Ideals versus Dollars: Donors, Charity Managers, and Government Grants," Journal of Political Economy, University of Chicago Press, vol. 95(4), pages 810-823, August.
    8. Bernheim, B Douglas, 1994. "A Theory of Conformity," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 841-877, October.
    9. Matthew Rabin, 1998. "Psychology and Economics," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 11-46, March.
    10. Drew Fudenberg & David K. Levine, 2008. "Reputation And Equilibrium Selection In Games With A Patient Player," World Scientific Book Chapters,in: A Long-Run Collaboration On Long-Run Games, chapter 7, pages 123-142 World Scientific Publishing Co. Pte. Ltd..
    11. Kreps, David M, 1997. "Intrinsic Motivation and Extrinsic Incentives," American Economic Review, American Economic Association, vol. 87(2), pages 359-364, May.
    12. Susan Rose-Ackerman, 1996. "Altruism, Nonprofits, and Economic Theory," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 701-728, June.
    13. Sugden, Robert, 1984. "Reciprocity: The Supply of Public Goods through Voluntary Contributions," Economic Journal, Royal Economic Society, vol. 94(376), pages 772-787, December.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Gianluca Grimalda & Lorenzo Sacconi, 2005. "The Constitution of the Not-For-Profit Organisation: Reciprocal Conformity to Morality," Constitutional Political Economy, Springer, vol. 16(3), pages 249-276, September.
    2. Gianluca Grimalda & Lorenzo Sacconi, 2002. "The Constitution of the Nonprofit Enterprise: Ideals, Conformism and Reciprocity," LIUC Papers in Ethics, Law and Economics 115, Cattaneo University (LIUC).
    3. Lorenzo Sacconi, 2007. "A Social Contract Account for CSR as an Extended Model of Corporate Governance (II): Compliance, Reputation and Reciprocity," Journal of Business Ethics, Springer, vol. 75(1), pages 77-96, September.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:liu:liuced:110. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Laura Ballestra). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.