Friday 30 November 2007

Nonprofit firms

Peter Klein at the most interesting blog, Organizations and Markets is writing on the nonprofit firm. What is their objective function? How are they organized, managed, and governed?

Klein points out that there is a new NBER paper out by Jill Horwitz and Austin Nichols, "What Do Nonprofits Maximize? Nonprofit Hospital Service Provision and Market Ownership Mix". It looks at the behaviour of nonprofit, government, and for-profit hospitals to address the questions asked above. The major result is that nonprofit and government-owned hospitals respond to competition; the more local-market competition they face from for-profit hospitals, the more likely they will offer profitable services and the less likely they will offer unprofitable services. For-profit hospitals, however, tend to offer the same mix of services regardless of what competing for-profit hospitals are offering.

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