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Antitrust and the Not-For-Profit Sector

  • Tomas J. Philipson
  • Richard A. Posner

Although the not-for-profit sector contributes greatly to aggregate output in many industries, there is little explicit analysis of the consequences of applying antitrust policy in this sector. This paper argues that the same incentives to collude exist in the non-profit sector as in the for-profit sector and that therefore, since competition is socially valuable regardless of the particular objectives of producers, the fact that antitrust law does not distinguish between the two sectors is efficient. The similarity in incentives derives from the fact that altruistic firms benefit from exploiting market power even when they would price below cost without regard to competition. Although the legal regulations governing the nonprofit sector limit the degree to which profits can be distributed, and therefore seek to reduce rents in a similar manner to antitrust laws, this nondistribution constraint does not obviate the need for antitrust in that sector. The argument for uniform antitrust doctrine in the two sectors extends to the exemptions from antitrust as well. In particular, patents (lawful monopolies intended to create incentives for innovation) stimulate innovation in the nonprofit sector only when they enable market power to be exploited, just as in the for-profit sector, and so the patent exemption from antitrust should be as broad in the nonprofit sector.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8126.

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Date of creation: Feb 2001
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Publication status: published as Tomas J. Philipson & Richard A. Posner, 2009. "Antitrust in the Not-for-Profit Sector," Journal of Law & Economics, University of Chicago Press, vol. 52(1), pages 1-18, 02.
Handle: RePEc:nbr:nberwo:8126
Note: HE PE
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  1. Dranove, David & Ludwick, Richard, 1999. "Competition and pricing by nonprofit hospitals: a reassessment of Lynk's analysis," Journal of Health Economics, Elsevier, vol. 18(1), pages 87-98, January.
  2. Martin Gaynor & William B. Vogt, 1999. "Antitrust and Competition in Health Care Markets," NBER Working Papers 7112, National Bureau of Economic Research, Inc.
  3. Lynk, William J, 1995. "Nonprofit Hospital Mergers and the Exercise of Market Power," Journal of Law and Economics, University of Chicago Press, vol. 38(2), pages 437-61, October.
  4. Jacquemin, Alexis & Slade, Margaret E., 1989. "Cartels, collusion, and horizontal merger," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 7, pages 415-473 Elsevier.
  5. Lynk, William J. & Neumann, Lynette R., 1999. "Price and profit," Journal of Health Economics, Elsevier, vol. 18(1), pages 99-116, January.
  6. Gaynor, Martin & Vogt, William B, 2003. " Competition among Hospitals," RAND Journal of Economics, The RAND Corporation, vol. 34(4), pages 764-85, Winter.
  7. Anup Malani & Tomas Philipson & Guy David, 2003. "Theories of Firm Behavior in the Nonprofit Sector. A Synthesis and Empirical Evaluation," NBER Chapters, in: The Governance of Not-for-Profit Organizations, pages 181-216 National Bureau of Economic Research, Inc.
  8. Frank A. Sloan & Gabriel A. Picone & Donald H. Taylor, Jr. & Shin-Yi Chou, 1998. "Hospital Ownership and Cost and Quality of Care: Is There a Dime's Worth of Difference?," NBER Working Papers 6706, National Bureau of Economic Research, Inc.
  9. Gruber, Jonathan, 1994. "The effect of competitive pressure on charity: Hospital responses to price shopping in California," Journal of Health Economics, Elsevier, vol. 13(2), pages 183-211, July.
  10. Daniel P. Kessler & Mark B. McClellan, 1999. "Is Hospital Competition Socially Wasteful?," NBER Working Papers 7266, National Bureau of Economic Research, Inc.
  11. John Simpson & Richard Shin, 1998. "Do Nonprofit Hospitals Exercise Market Power?," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 5(2), pages 141-157.
  12. Lakdawalla, Darius & Philipson, Tomas, 2006. "The nonprofit sector and industry performance," Journal of Public Economics, Elsevier, vol. 90(8-9), pages 1681-1698, September.
  13. Ordover, Janusz A. & Saloner, Garth, 1989. "Predation, monopolization, and antitrust," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 9, pages 537-596 Elsevier.
  14. Keeler, Emmett B. & Melnick, Glenn & Zwanziger, Jack, 1999. "The changing effects of competition on non-profit and for-profit hospital pricing behavior," Journal of Health Economics, Elsevier, vol. 18(1), pages 69-86, January.
  15. W. Kip Viscusi & Joseph E. Harrington & John M. Vernon, 2005. "Economics of Regulation and Antitrust, 4th Edition," MIT Press Books, The MIT Press, edition 4, volume 1, number 026222075x, June.
  16. Dennis W. Carlton & Gustavo E. Bamberger & Roy J. Epstein, 1994. "Antitrust and Higher Education," University of Chicago - George G. Stigler Center for Study of Economy and State 107, Chicago - Center for Study of Economy and State.
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