Firms, Nonprofits, and Cooperatives: A Theory of Organizational Choice

P. Herbst, J. Prüfer

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Abstract

This paper formalizes the difference between firms, nonprofits, and cooperatives and identifies optimal organizational choice. In a model of quality provision, we find a clear ranking of quality produced: Firms provide lowest and nonprofits highest levels of quality. Efficiency, however, depends on the competitive environment, the decision making process and technology. Cooperatives are optimal when decision making costs are low. Else, cooperatives are increasingly dominated by either nonprofits or firms (depending on the incremental costs of quality production). Finally, changes in the competitive environment affect organizational choice: Increased competition induces a shift towards firm organization and away from nonprofits.
Original languageEnglish
Place of PublicationTilburg
PublisherMicroeconomics
Number of pages40
Volume2007-7
Publication statusPublished - 2007

Publication series

NameCentER Discussion Paper
Volume2007-7

Keywords

  • Theory of the Firm
  • Cooperatives
  • Nonprofits
  • Organizational Choice
  • Organizational Change

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    Herbst, P., & Prüfer, J. (2007). Firms, Nonprofits, and Cooperatives: A Theory of Organizational Choice. (CentER Discussion Paper; Vol. 2007-7). Microeconomics.