Wednesday, April 8, 2009
Posted by D. Daniel Sokol
ABSTRACT: Although the not‐for‐profit sector contributes greatly to aggregate output in many industries, there has been little explicit analysis of the economic consequences of applying antitrust policy in this sector. Despite the differences between for‐profit and nonprofit firms stressed in conventional economic analyses, U.S. antitrust law generally does not distinguish between these two organizational forms. This paper argues that, under plausible assumptions and with possible exceptions, the same incentives to restrain trade exist in the nonprofit sector as in the for‐profit sector. Altruistic firms benefit from exploiting market power, even when they would price below cost in the absence of competition. In fact, the efficiency gains from antitrust policy may often be larger for nonprofit firms. Therefore, a policy of promoting competition has social value even when producers’ motivations are altruistic. The argument for uniform antitrust treatment of the two sectors extends to exemptions from antitrust law as well.