Scandinavian Working Papers in Economics
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Department of Business and Economics, University of Southern Denmark Discussion Papers of Business and Economics
Department of Business and Economics, University of Southern Denmark

No 1/2011:
Nonprofit and profit companies in monopolistic competition

Morten Skak ()

Abstract: A homogenous goods market with nonprofit and profit companies engaged in monopolistic competition is proposed. In a short run equilibrium, entrance of more companies of both types increases consumer surplus and reduces company profit. However, nonprofit companies under a long run zero profit constraint will act inefficiently and have higher marginal costs than profit companies. From this follows that more funds for donations to nonprofit companies reduce the welfare to be gained on the market. Depending on the size of donations, nonprofit companies may have higher, the same or lower (quality) output than profit companies.

Keywords: Nonprofit; Market structure; Monopolistic competition; Efficiency; Funding; Donations; Grants; Welfare; (follow links to similar papers)

JEL-Codes: I31; I38; L10; L13; L21; L25; L31; L33; L38; (follow links to similar papers)

23 pages, January 1, 2011

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