Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Monday, June 11, 2018

Competition in Public Service Provision: The Role of Not-for-profit Providers

Timothy Besley and James Malcomson address Competition in Public Service Provision: The Role of Not-for-profit Providers.

ABSTRACT: With public services such as health and education, it is not straightforward for consumers to assess the quality of provision. Many such services are provided by monopoly not-for-profit providers and there is concern that for-profit providers may increase profit at the expense of quality. This paper explores whether entry by for-profit providers is good for consumers despite the problem of unobserved quality. The model generates three key policy-relevant insights. First, by developing a novel approach to competition between different organizational forms, it frames the relevant trade-offs precisely. Second, it shows the value of keeping an incumbent not-for-profit as an active provider. Third, it characterizes the optimal payment (or voucher value) to an entrant for each consumer who switches in a way that can be applied empirically.

http://lawprofessors.typepad.com/antitrustprof_blog/2018/06/competition-in-public-service-provision-the-role-of-not-for-profit-providers.html

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