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Competition in public service provision: the role of not-for-profit providers

Besley, Timothy and Malcomson, James M. (2018) Competition in public service provision: the role of not-for-profit providers. Journal of Public Economics, 162. pp. 158-72. ISSN 0047-2727

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Identification Number: 10.1016/j.jpubeco.2018.04.004

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 the implications of entry by for-profit providers when there is 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.

Item Type: Article
Official URL: https://www.journals.elsevier.com/journal-of-publi...
Additional Information: © 2018 Elsevier B.V.
Divisions: Economics
Subjects: H Social Sciences > HB Economic Theory
JEL classification: H - Public Economics > H1 - Structure and Scope of Government > H11 - Structure, Scope, and Performance of Government
H - Public Economics > H4 - Publicly Provided Goods > H44 - Publicly Provided Goods: Mixed Markets
L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L21 - Business Objectives of the Firm
L - Industrial Organization > L3 - Nonprofit Organizations and Public Enterprise > L31 - Nonprofit Institutions; NGOs
Sets: Departments > Economics
Date Deposited: 18 Apr 2018 09:50
Last Modified: 02 May 2019 17:21
URI: http://eprints.lse.ac.uk/id/eprint/87517

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