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The Origins and Purposes of Not-for-Profit Firms

The Origins and Purposes of Not-for-Profit Firms. CHP/PCOR seminar by Charles E Phelps University of Rochester. Basic Concepts for Today. NFP Firms’ Essential Market Features Service, not product Local (spacial) monopoly features

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The Origins and Purposes of Not-for-Profit Firms

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  1. The Origins and Purposesof Not-for-Profit Firms CHP/PCOR seminar byCharles E Phelps University of Rochester

  2. Basic Concepts for Today • NFP Firms’ Essential Market Features • Service, not product • Local (spacial) monopoly features • Emerge in communities to provide higher quality than profit maximizing monopolist • “Must” produce at higher quality than FP

  3. NFP In the Market • Assume that U= f(QL, QN) (more later!) • Assume zero profit constraints in long run • Assume preferences of governing body to be maximized • Market competition will dictate demand curves facing NFP firms (monopolistic competition model)

  4. Utility Functions are Stable! • We can use U-function model reliably through time • Standard voting models (rational actor models) give organization with stable preferences through time

  5. The Monopolist’s Quality Choice

  6. The Zero Profit Projection

  7. Another Look

  8. Voting Rules Produce an Institutional Utility Function

  9. Buying a New Equlibrium with Restricted Gift

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