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The Constitution of the Nonprofit Enterprise: Ideals, Conformism and Reciprocity

We provide an account of the non profit enterprise based on the motivations of the agents involved. Our main idea is that these are ex -post motivated by both self-interest and a conditional willingness to conform to their ex ante accepted constitutional ideology, which are weighed up in a comprehensive utility function. Ideology is shaped as the result of a hypothetical ‘social' contract between the relevant figures participating in the venture, in particular an entrepreneur, a worker, and a consumer who acts as a dummy beneficiary in the ex-post stage. It can thus be defined as a normative principle of fairness that boils down to a distributive social welfare function defined over the outcomes of a game, which permits to order them according to their conformity to the constitutional ideology. For conformist preferences depend upon expectations of reciprocal conformity to a normative principle, defined on social states described in as much they conform to an ideal, then the agents' model of choice asks for the adoption of the psychological games approach, where payoff functions range over not only the players' strategies but also their beliefs. If the conformist prompt to action is sufficiently strong then the outcome in which both the active agents perform an action improving the quality of the good with respect to the free market standard, thus maximising the surplus of the consumers, results in a psychological Nash equilibrium of the game. We associate this outcome, and the corresponding norm of behaviour, with the constitution of the non profit enterprise. We also show that the structure of the interaction is a coordination game, thus calling for the necessity of devices such as codes of ethics to solve the coordination problem. Keywords: Nonprofit, non-self-interested motivations, conformism, reciprocity, ideology.

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Paper provided by Cattaneo University (LIUC) in its series LIUC Papers in Ethics, Law and Economics with number 115.

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Length: 31 pages
Date of creation: Nov 2002
Publication status: Published in LIUC papers, no.115, 2002 - Etica, diritto ed economia 8
Handle: RePEc:liu:liuced:115
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  1. Susan Rose-Ackerman, 1996. "Altruism, Nonprofits, and Economic Theory," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 701-728, June.
  2. 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).
  3. Lorenzo Sacconi, 2001. "Incomplete contracts and corporate ethics: a game theoretical model under fuzzy information," LIUC Papers in Ethics, Law and Economics 91, Cattaneo University (LIUC).
  4. Scanlon, T. M., 2001. "Symposium on Amartya Sen's philosophy: 3 Sen and consequentialism," Economics and Philosophy, Cambridge University Press, vol. 17(01), pages 39-50, April.
  5. Rabin, Matthew, 1993. "Incorporating Fairness into Game Theory and Economics," American Economic Review, American Economic Association, vol. 83(5), pages 1281-1302, December.
  6. Bernheim, B Douglas, 1994. "A Theory of Conformity," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 841-877, October.
  7. Sugden, Robert, 2000. "Team Preferences," Economics and Philosophy, Cambridge University Press, vol. 16(02), pages 175-204, October.
  8. Verbeek, Bruno, 2001. "Consequentialism, rationality and the relevant description of outcomes," Economics and Philosophy, Cambridge University Press, vol. 17(02), pages 181-205, October.
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