investment and market dominance we analyze a model of oligopolistic competition with ongoing investment special cases include incremental investment patent races learning by doing and network externalities we investigate circumstances under which a firm with low costs or high quality will extend its initial lead through investments to this end we derive a new comparative statics result for general games with strategic substitutes which applies to our investment game finally we highlight plausible countervailing effects that arise when investments of leaders are less effective than those of laggards or in dynamic games when firms are sufficiently patient

why do different countries choose a different public private mix of educational services we observe a wide range across countries in the percentage of total enrollments that attend private rather than public schools this paper seeks to explain 1 the systematically higher proportion of private enrollments pvt in developing as compared with developed countries at the secondary level and 2 the seemingly random variation across countries within a given level of education and stage of development i argue that the latter is due to differentiated demand and nonprofit supply both of which stem from cultural heterogeneity especially religious heterogeneity in contrast the large pvt at the secondary level in developing countries is hypothesized to stem from limited public spending which creates an excess demand from people who would prefer to use the public schools but are involuntarily excluded and pushed into the private sector the limited public spending on secondary education in turn is modelled as a collective decision which is strongly influenced by the

optimal regulation with unknown demand and cost functions abstract this paper presents an analysis of optimal regulation of a firm that has private information about both its cost and demand functions an earlier paper on the same topic lewis and sappington rand j econ 19 1998 438 457 is reviewed a difficulty with their analysis is discussed and an alternative formulation of their model is proposed two broad classes of problem are considered i the case where social and private incentives are roughly aligned which implies optimal prices are weakly above marginal costs and ii the case where social and private incentives diverge which implies pricing below marginal cost may be optimal journal of economic literature classification numbers d42 d82 l51

modeling charitable giving using a box cox standard tobit model there is a large literature investigating the determinants of charitable giving in particular price and income elasticities we find that many of the most often reported results from this literature rely on a model specification that is inappropriate when applied to recent federal tax file data we develop a standard tobit model with a box cox transformation parameter that nests a number of other specifications the box cox model yields estimates of price elasticities and expected charitable contributions that differ from those obtained using the typical specification additionally we find that the use of sample weights provides potentially important policy insights copyright 1991 by mit press

an accurate measurement of the crowd out effect income effect and price effect for charitable contributions in the past empirical research on charitable contributions has focused on two issues estimating the income and price elasticities of contributions and estimating the extent to which government funding crowded out private contributions the two fundamental problems in all these studies are the differences in the underlying conceptual models and the use of imperfect data for empirical analysis this paper addresses both of these problems

competition and screening with motivated health professionals two hospitals compete for the exclusive services of health professionals who are privately informed about their ability and motivation hospitals differ in their ownership structure and in the mission they pursue the non profit hospital sacrifices some profits to follow its mission but becomes attractive for motivated workers in equilibrium when both hospitals are active the sorting of workers to hospitals is efficient and ability neutral allocative distortions are decreasing in the degree of competition and disappear when hospitals are similar the non profit hospital tends to provide a higher amount of care and offer lower salaries than the for profit one

the economic lot size and relevant costs abstract in many accounting textbooks it is strongly argued that decisions should always be evaluated on relevant costs that is variable costs and opportunity costs surprisingly when it comes to economic order quantities or lot sizes some textbooks appear to be less straightforward the question whether described eoq models are in fact based upon variable costs and opportunity costs is generally not explicitly dealt with this paper will investigate relevant costs if lot sizes in a components manufacturing plant are changed the nature of opportunity costs is examined and several kinds of semi variable costs regarding the use of infrastructural capacity and material flow are discussed in this manner it is shown that in eoq models sunk costs are always included it also occurs that variable costs must be analyzed carefully this is also the case for more advanced models as described by for instance wagner and within or bertrand opportunity costs are in fact neglected which nevertheless is not always that dramatic as some authors suggest

incentives for motivated agents under an administrative constraint consider an agent who has an expertise in producing a non marketable good this good is valued by a single principal and there is a verifiable measure of the agent s performance crucially the agent is intrinsically motivated due to warm glow altruism in addition the agent s budget which is controlled by the principal must not be less than the monetary performance cost faced by the agent this gives rise to a limited liability constraint it also restricts the agent s ability to under report costs in such environment we determine the link between the agent s budget and performance our results come in contrast to the received solution of the principal agent problem and to most in the literature on mission motivated organisations and public services provision

quality competition with profit constraints abstract firms in markets such as health care and education are often profit constrained due to regulation or their non profit status and they are often viewed as being altruistic towards consumers we use a spatial competition framework to study incentives for cost containment and quality provision by altruistic firms facing profit constraints if prices are regulated profit constraints lead to lower cost containment efforts but higher quality if and only if firms are sufficiently altruistic under price competition profit constraints reduce quality and cost containment efforts but lead to lower prices if and only if firms are sufficiently altruistic profit constrained firms cost containment efforts are below the first best while their quality might be too high or too low if prices are regulated profit constraints can improve welfare and be a complement or substitute to a higher regulated price depending on the degree of altruism

competitive price discrimination we model firms as supplying utility directly to consumers the equilibrium outcome of competition in utility space depends on the relationship u between profit and average utility per consumer public policy constraints on the deals firms may offer affect equilibrium outcomes via their effect on u f rom this perspective we examine the profit utility and welfare implications of price discrimination policies in an oligopolistic framework we also show that an equilibrium outcome of competitive nonlinear pricing when consumers have private information about their tastes is for firms to offer efficient two part tariffs

purchasing health care services from providers with unknown altruism cost sharing rules for paying physicians have been advanced as a way of generating incentives for the provision of quality care while recognizing their potential negative effects on production efficiency however the optimal sharing rate typically depends on the degree to which the physician acts in the interest of the patient what we identify as the physician s altruism since the degree of altruism is likely to vary across physicians and to be private information the standard rules for setting the cost sharing rate are unlikely to be optimal this paper derives conditions for the optimal non linear cost sharing mechanism in the presence of asymmetric information about altruism and shows how it can sometimes be implemented through a menu of linear cost sharing schemes the model can be used to rationalize the design of the fund holder system for general practictioners that operated in the 1990s in the united kingdom

does competition from private surgical centres improve public hospitals performance evidence from the english national health service abstract this paper examines the impact of a government programme which facilitated the entry of for profit surgical centres to compete against incumbent national health service hospitals in england we examine the impact of competition from these surgical centres on the efficiency measured by pre surgery length of stay for hip and knee replacement patients and case mix of incumbent public hospitals we exploit the fact that the government chose the broad locations where these surgical centres independent sector treatment centres or istcs would be built based on local patient waiting times not length of stay or clinical quality to construct treatment and control groups that are comparable with respect to key outcome variables of interest using a difference in difference estimation strategy we find that the government facilitated entry of surgical centres led to shorter pre surgery length of stay at nearby public hospitals however these new entrants took on healthier patients and left incumbent hospitals treating patients who were sicker this paper highlights a potential trade off that policymakers face when they promote competition from private for profit firms in markets for the provision of public services

wolves in sheep s clothing is non profit status used to signal quality abstract why do many firms in the healthcare sector adopt non profit status one argument is that non profit status serves as a signal of quality when consumers are not well informed a testable implication is that an increase in consumer information may lead to a reduction in the number of non profits in a market we test this idea empirically by exploiting an exogenous increase in consumer information in the us nursing home industry we find that the information shock led to a reduction in the share of non profit homes driven by a combination of home closure and sector switching the lowest quality non profits were the most likely to exit our results have important implications for the effects of reforms to increase consumer provision in a number of public services

on the availability of relevant costs information in operations management abstract the operations management om function is amongst others held responsible for in time delivery of customer orders against minimal costs from a management accounting point of view all decisions which are made to fulfil this function can be evaluated against relevant costs this would imply that for each decision management must take into consideration all possible variable costs and opportunity costs at the operational level variable costs consist of capacity costs such as work in overtime and inventory carrying costs opportunity costs may arise if promised delivery dates cannot be met in practice this om function is often partially performed by materials management production management and or physical distribution management moreover in an engineer to order production situation engineering management and related areas e g process planning are also involved in each stage of production physical or non physical decisions concerning internal delivery dates utilization of capacity and inventory may occur research was carried out to find out whether management is actually provided with relevant costs information to evaluate these operational decisions therefore case study research in eight dutch industrial firms was carried out it concerned small to medium sized firms 80 250 employees firms all producing rather complex machines for industrial markets production control situations varied between assemble to order and engineer to order the case studies were carried out in a highly structured manner it occurred that all kinds of relevant costs information was missing or not known to the management in charge missing information concerned internal and external delivery performance actual inventory and wip levels and actual utilization of capacity furthermore it arose that all kinds of standards were unreliable from a management accounting perspective the results of the case study research indicate that relevant costs decision making is al least not very common in practice if relevant costs are partially missing managers will decide using other irrelevant information we feel that this might perhaps be an explanation for the growing discontent that the management accounting is confronted with

the nonprofit sector and industry performance abstract despite the importance of nonprofit industries in the economy little analysis has been conducted as to whether the behavior of such industries differs from that of for profit industries extending previous firm level analyses we propose a neoclassical theory with an endogenous nonprofit sector our analysis implies that nonprofit firms have a competitive advantage over for profit firms so that marginal changes in the industry operate through the for profit sector as such marginal industry behavior is identical to that of a for profit industry and nonprofit regulations may have a limited impact or even no impact on overall industry performance our theory has the methodological advantage that standard for profit analysis applies directly to nonprofit firms because they can be analyzed as for profit firms with lower costs we discuss aspects of the empirical literature that test this theory of nonprofit activity

unions and workers welfare in chinese firms based on a survey of 1 268 firms in 12 cities this article empirically studies unions effects on worker welfare in china regressions carried out on a rich set of specifications show that unionization is significantly associated with higher hourly wages and larger pension coverage and weakly associated with lower monthly working hours further econometric analysis finds that unions promote individual and collective contracts the effect of collective contracts vanishes when unions are present whereas individual contracts have independent and positive effects in addition unions have effects on workers welfare independent of collective and individual contracts

not for profit entrepreneurs abstract entrepreneurs who start new firms may choose not for profit status as a means of committing to soft incentives such incentives protect donors volunteers consumers and employees from ex post expropriation of profits by the entrepreneur we derive conditions under which completely self interested entrepreneurs opt for not for profit status despite the fact that this status limits their ability to enjoy the profits of their enterprises we also show that even in the absence of tax advantages unrestricted donations would flow to non profits rather than for profit firms because donations have more significant influence on the decisions of the non profits

public service motivation as an argument for government provision a public service motivation psm inclines employees to provide effort out of concern for the impact of that effort on a valued social service though deemed to be important in the literature on public administration this motivation has not been formally considered by economists when a psm exists this paper establishes conditions under which government bureaucracy can better obtain psm motivated effort from employees than a standard profit maximizing firm the model also provides an efficiency rationale for low powered incentives in both bureaucracies and other organizations producing social services 2000 elsevier science s a all rights reserved

theories of non profit institutions abstract as thoughtful modelling and empirical research of non profit enterprises continues to grow two general views of non profit organizations are emerging one view is that non profit firms are inefficient and wasteful another view is that non profit firms are a response to market failure and thus may improve efficiency the purpose of this paper is to explore the theoretical and empirical work that represents the current divided state of thinking in this area

would nonprofit workers accept to earn less evidence from france this article focuses on wage differentials between french nonprofit for profit and public sectors considering the public sector allows testing more extensively the labour donation theory preston 1989 the findings support this theory because nonprofit workers accept to earn significantly less than they would earn in the for profit and public sectors they also suggest differences in the motivations of workers in these sectors nonprofit workers are attracted to their work for reasons transcending material compensation

measurable economic consequences of investments in flexible capacity abstract investments in flexible capacities are large it is not surprising that a solid economic infrastructure is a precondition from the strategic prospective the structural support will rest on qualitative grounds yet the central problem posed in the present article is how the economic consequences of investments in flexible capacities can actually be measured it is worked out in three steps to begin with the just in time concept is placed in an integral framework of goods flow control this is essential because it will be found that without this analysis there is a danger that the estimate of the positive effects will be too optimistic subsequently we introduce a concrete production situation lastly for the selected production situation the concrete economic consequences of a flexible capacity investment will be examined cor starting point is that the investment will in fact lead to an adjustment of the logistics concept for that reason the maximum just in time advantages can be realised at the same time the possible misrepresentation resulting from traditional costs calculation will be examined

whither the nonprofit wage differential estimates from the 1990 census this article provides new estimates of the nonprofit for profit wage differential in the u s economy using observations on 4 1 million private sector employees from the 1990 census i find either zero or slightly positive economy wide wage differences between nonprofit and for profit employees in a standard earnings equation format significant wage differentials are found at the disaggregated occupation and industry level and provide a basis for testing hypotheses explaining nonprofit for profit wage differences

productivity crowding out in labor markets with motivated workers abstract when workers intrinsic motivation matters a wage increase has mixed consequences on applicants productivity and motivation as shown in public service healthcare education and politics in a simple theoretical framework where ability and motivation are workers private information we rationalize these differentiated responses and identify intuitive conditions for higher wages inducing self selection of more or less productive and motivated workers the selection patterns depend both on the statistical association between workers characteristics and on the difference between the incentivized returns to ability across sectors we emphasize a crowding out effect of wage on workers productivity that has not been analyzed in the theoretical literature before

what motivates and constrains politicians to privatize the case of china abstract the paper finds that whether local government leaders in china are motivated to privatize their soes depends on if the ownership transfer is expected to stimulate sufficiently high growth of local tax revenues meanwhile for a specific privatization program to succeed it has to overcome the workers compensation constraint and the bank debt servicing constraint

the economics of vocation or why is a badly paid nurse a good nurse abstract given the longstanding shortage of nurses in many jurisdictions why could not nursing wages be raised to attract more people into the profession we tell a story in which the status of nursing as a vocation implies that increasing wages reduces the average quality of applicants attracted the underlying mechanism accords with the notion that increasing wages might attract the wrong sort of people into the profession and highlights an in efficiency wage mechanism particular to vocations which makes wages sticky up wards the analysis has implications for job design in vocation based sectors such as nursing and teaching

a total eclipse of the heart compensation strategies in entrepreneurial nonprofits abstract we examine how shifting resource dependencies influence compensation strategy during commercial transitions within entrepreneurial nonprofits analyzing a longitudinal sample of 4732 organizations we show how compensation strategies shift non linearly as nonprofits transition from contributed resource dependence to market based resource dependence dynamic quadratic models unveil a dual threshold of commercialization concerning this transition nonprofits at moderate stages of commercialization contend with competing dependencies from both contributed and market based sources resulting in a decrease in compensation spending and an increase in part time employment at higher stages contributed resource dependence is eclipsed by market based dependence reflected in increasing compensation spending and full time employment

wage determination of registered nurses in proprietary and nonprofit nursing homes this study explores why registered nurses employed in nonprofit nursing homes earn higher wages than those employed in proprietary facilities previous studies have explained this finding in a property rights context where higher wages were posited to result from the weaker incentives for cost minimization accompanying nonprofit status this paper tests an alternative explanation of sectoral wage differences which is predicated on the reason for the coexistence offor profit and nonprofit firms in a given industry informational constraints concerning the quality of care are posited to cause the long term health care market to fail to provide care at the upper levels of a quality of care continuum nonprofits are viewed as a response to this form of market failure acting to fulfill customers demand for higher quality and higher cost long term care with attendant demand for higher quality nurses than in for profit homes both the observed sectoral pattern in selectivity and wage decompositions based on selectivity corrected wage regressions call into question the property right explanation yet are consistent with an asymmetric information explanation

nonlinear pricing with random participation the canonical selection contracting programme takes the agent s participation decision as deterministic and finds the optimal contract typically satisfying this constraint for the worst type upon weakening this assumption of known reservation values by introducing independent randomness into the agents outside options we find that some of the received wisdom from mechanism design and nonlinear pricing is not robust and the richer model which allows for stochastic participation affords a more general empirical specification we develop a multidimensional methodology for addressing this class of problems providing two important applications to nonlinear pricing first with nonlinear pricing by a monopolist the familiar nodistortion at the top result persists but in tandem with the surprising conclusion that there is either no distortion at the bottom or bunching second in a simple model of product differentiated duopolists competing with nonlinear pricing we show that generally the duopoly outcome is qualitatively similar to the monopoly outcome however when marginal costs are symmetric and competition is sufficiently intense distortions disappear and the equilibrium outcome takes a remarkably simple form efficient quality allocations with cost plus fee pricing

hospital competition and quality with regulated prices we analyse the effect of competition on quality in hospital markets with regulated prices considering the effect of both introducing competition monopoly versus competition and increasing competition through either lower transportation costs increased substitutability or a higher number of hospitals with semi altruistic providers and a fairly general cost structure we show that the relationship between competition and quality is generally ambiguous in contrast to the received body of theoretical literature this is consistent with and potentially explains the mixed empirical evidence

principals competing for an agent in the presence of adverse selection and moral hazard abstract this paper analyzes competition between two principals for the exclusive services of an agent of unknown ability the principals differ in their marginal and average valuations for the agent s input they compete by offering menus of incentive contracts a prominent feature of the equilibrium when neither principal fully dominates is that they both offer identical pooling contracts to an interval of intermediate ability types all these types supply a constant input level receive the same monetary rewards and yield zero profits to the principals in addition the effort of low ability types is greater than the efficient level and welfare may be lower than if there was only one principal journal of economic literature classification numbers d82 c72

signaling and screening of workers motivation abstract this paper develops a model in which workers are heterogeneous in their intrinsic motivation to work at a firm we characterise optimal incentive schemes and examine how the firm can attract and select highly motivated workers to fill a vacancy when workers motivation is private information while posting a higher wage increases the probability of filling the vacancy it decreases the expected average quality of job applicants because less motivated workers are induced to apply the optimal wage scheme entails a trade off between the probability of filling the vacancy the rents left to the worker and the expected worker s motivation

asymmetric information ownership and quality of care an empirical analysis of nursing homes theoretically when asymmetric information exists nonprofit organizations due to the attenuation of the property right provide better quality of service than do the for profits despite extensive theoretical examination of the behavior of nonprofits there has been very little empirical testing of the plausibility of these theories this article addresses the effect of ownership type on the quality of service in the nursing home industry an environment particularly conducive to identifying the existence of asymmetric information the study shows that the differences between for profit and nonprofit homes do become manifest when asymmetric information is present

modeling charitable contributions of time and money abstract public goods theory predicts that government spending on charity can perfectly crowd out charitable contributions empirical research has found little support for the perfect crowd out hypothesis however the empirical work only measures part of a contributor s total contribution gifts of money contributors also volunteer labor this article extends the public goods model to the case in which individuals contribute both time and money to a charity that in turn produces a public good the model suggests that charitable contributions of time and money are perfectly substitutable in equilibrium this result offers new interpretations for existing empirical observations and suggests a new test of the crowd out hypothesis the implications of the model are empirically tested using a national survey of charitable activity

quality reputation and the choice of organizational form this paper revisits the hypothesis that nonprofit organizations emerge in markets that are characterized by contractual incompleteness because they ensure consumers against opportunistic behavior we extend the glaeser and shleifer glaeser e shleifer a 2001 not for profit entrepreneurs journal of public economics 81 99 115 framework which studies an entrepreneur s optimal choice of organizational form and service quality when quality is non contractible into a repeated interaction setting the main result is that when reputations can be sustained then for profit status is the preferred organizational form and high quality services are ensured this finding suggests that existing explanations of nonprofit organizations that focus entirely on contractual imperfections in the producer consumer relationship may be inadequate

dynamic income progressive taxes and the timing of charitable contributions using an econometric model of charitable giving and a 10 year panel of tax return data i find that previous studies have underestimated the effects of permanent income and overestimated the effects of permanent changes in tax prices the significant statutory tax changes that occurred during the 1980s especially in 1986 serve to identify the key model parameters my results imply that people smooth their giving when transitory income changes but also time their giving to exploit transitory changes in tax prices the results also raise questions about how effectively the tax incentives permanently influence the level rather than just the timing of charitable giving by individuals

media coverage and charitable giving after the 2004 tsunami author affiliation philip h brown department of economics colby college 5246 mayflower hill waterville me 04901 usa e mail phbrown colby edu corresponding author jessica h minty analysis group inc 111 huntington avenue 10th floor boston ma 02199 usa e mail jminty analysisgroup com acknowledgment we are grateful to claudio agostini michael donihue martin farnham rebecca graninger daniel hamermesh melanie siben tom tietenberg andreas waldkirch seminar participants at colby college and two anonymous referees for numerous helpful comments and suggestions we would also like to acknowledge reuters alertnet and chuck lakin for their assistance in identifying data sources and care usa catholic relief services mercy corps surfaid international and four other relief agencies for providing data for the purpose of this research finally philip h brown would like to thank the international food policy research institute for sabbatical support during the preparation of this manuscript 1 introductionrelief workers have long believed in the causal relationship between media coverage of humanitarian crises and charitable giving to relief agencies for example private donations to relief agencies during the early stages of the 1994 rwandan genocide were sufficient to support approximately one million displaced rwandans but after the tribulations of o j simpson and tanya harding eclipsed rwanda in the media funding for relief activities began to decline the perception among many aid workers in the camps for rwandan refugees including one of the authors was that the media had turned its back on the crisis with potentially dire consequences 1while anecdotal evidence abounds few studies have systematically assessed the relationship between media coverage and the behavior of private donors and those that do suffer from important analytical shortcomings for example an analysis undertaken by the institute for philanthropy finds that 14 of 15 surveyed british philanthropists believe that the media has the power to encourage private giving with 11 of the 15 being inspired to make charitable donations themselves breeze 2005 similarly olsen carstenson and hoyen 2003 find a high correlation between the total number of relevant articles in western newspapers and the total amount of humanitarian assistance allocated to victims of the flooding in mozambique in 2000 and the cyclone in eastern india in 1999 unfortunately neither sample is large enough to make generalizations nor is there any attempt to quantify the magnitude of the causal relationship in part the difficulty in quantifying the relationship stems from disentangling the effect of new developments in stories covered in the media from the pure effect of media coverage returning to the rwanda case the former is tantamount to asking what is the combined effect of 10 000 additional deaths and a five minute news story on donations to u s charities while the latter is equivalent to asking given that 10 000 people were killed what is the effect of increasing the news story from five minutes to six in this paper we use the december 26 2004 tsunami as a case study to quantify the causal effect of media coverage on donations to charity specifically we consider the effects of reporting on three nightly network news broadcasts and articles in two prominent newspapers on private donations to seven u s relief agencies to eliminate the time lag between when news reports are seen or read and when donations are received by relief agencies we focus exclusively on donations made via the internet we also control for donor fatigue tax incentives and weekends to better isolate the effect of media coverage finally to alleviate simultaneity concerns and omitted variable bias including new developments in the tsunami story itself we use announcements of casualties among u

federalism and the soft budget constraint the government s incentives to bail out inefficient projects are determined by the trade off between political benefits and economic costs the latter depending on the decentralization of government two effects of federalism are derived first fiscal competition among local governments under factor mobility increases the opportunity costs of bailout and thus serves as a commitment device the competition effect second monetary centralization together with fiscal decentralization induces a conflict of interests and thus may harden budget constraints and reduce inflation the checks and balance effect the authors analysis is used to interpret china s recent experience of transition to a market economy copyright 1998 by american economic association

voluntary donations and public expenditures in a federal system proponents of the new federalism argue that nonprofit organizations and local governments will fully offset federal social service expenditure cutbacks the author analyzes this proposition as a competitive game in which donations are motivated by private and public good considerations the author characterizes the response of political economic equilibrium to exogenous changes in federal expenditures when local voters are cognizant of donor reactions partial replacement is the most likely outcome though others are possible copyright 1987 by american economic association

replacing trust with control a field test of motivation crowd out theory results in behavioural economics suggest that material incentives can crowd out motivation if agents are mission oriented rather than self interested we test this prediction on a sample of non profit organisations in sweden traditionally contracts with the main principal the swedish foreign aid agency have been based on trust and self regulation we designed a randomised policy experiment effectively replacing the trust based contract with an increased level of monitoring from the principal overall using both self reported and observed measures of outreach we find that the intervention increased outreach reduced expenditures and reduced the number of financial irregularities

working in the for profit versus not for profit sector what difference does it make an inquiry on preferences of voluntary and involuntary movers we investigate the drivers of the for profit not for profit wage differential by comparing judgments of job characteristics of workers who voluntarily or involuntarily moved from the former to the latter sector we define voluntary movers as those who applied for a job in a not for profit organization and when successful resigned from a for profit position while involuntary movers have either been laid off by their company or resigned without already having a job offer in the not for profit sector we observe that a large share of voluntary movers do not end up with higher wages but surprisingly do have higher job satisfaction after the change the vast majority of voluntary movers find significantly higher time flexibility improved relationships with stakeholders and closer conformity to educational skills in their new jobs our findings support the forprofit not for profit compensating differential hypothesis and shed light on mechanisms that are beyond the job donation behavior of intrinsically motivated workers

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 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

the charitable activities of terrorist organizations violent groups sometimes invest significant resources in social work notably in the form of charities and ngos the present paper models a terrorist group s charities as a means to advertise its cause in order to raise popular support the analysis explains how different types of organizations arise in equilibrium depending on government policies then the interaction between a purely terrorist group and an independent local ngo is examined it is shown that a purely terrorist group always invests in more attacks than an integrated terrorist charity organization furthermore the latter may have more ngo activity than a separate local ngo

thanks for nothing not for profits and motivated agents we re examine the labor donation theory of not for profits and show that these organizations may exist not necessarily because motivated workers prefer to work in them or that they dominate for profits in terms of welfare but because the excess supply of motivated workers makes the non profit form more attractive to managers we show that if firms had to compete for motivated workers then not for profit firms would be competed out by for profit firms therefore in the choice between not for profit and for profit provision other than incentive problems the distribution of rents between management and workers and consequently the relative scarcity of motivated workers may play an important role

does unmeasured ability explain inter industry wage differentials this paper provides empirical assessments of the two leading explanations of measured inter industry wage differentials 1 true wage differentials exist across industries and 2 the measured differentials simply reflect unmeasured differences in workers productive abilities first we summarize the existing evidence on the unmeasured ability explanation second we construct a simple model which shows that if matching is important then endogenous job change decisions can create important self selection biases even in first differenced estimates of industry wage differentials third we analyze a sample that approximates the experiment of exogenous job loss we find that i the wage change experienced by a typical industry switcher closely resembles the difference in the relevant industry differentials estimated in a cross section and ii pre displacement industry affiliation plays an important role in post displacement wage determination

multiproduct nonlinear pricing typically work on mechanism design has assumed that all private information can be captured in a single scalar variable this paper explores one way in which this assumption can be relaxed in the context of the multiproduct nonlinear pricing problem it is shown that the firm will choose to exclude some low value consumers from all markets a class of cases that allow explicit solution is derived by making use of a multivariate form of integration by parts in such cases the optimal tariff is cost based

effects of property rights on labor costs of nonprofit firms an application to the day care industry this paper estimates differences in labor costs between nonprofit and for profit firms in the day care industry a theoretical model which draws on the property rights literature as well as recent theo ries of nonprofit labor markets predicts that the magnitude and sign of the nonprofit salary differential will depend on specific characteristics of the samples analyzed empirical results reveal that in th e most competitive segment of the day care industry the nonprofit salary differential is insignificant however in the less competitive government subsidized segment of the industry the nonprofit different ial is significantly positive it ranges from 5 percent to 10 percent copyright 1988 by blackwell publishing ltd

competition and incentives with motivated agents a unifying theme in the literature on organizations such as public bureaucracies and private nonprofits is the importance of mission as opposed to profit as an organizational goal such mission oriented organizations are frequently staffed by motivated agents who subscribe to the mission this paper studies incentives in such contexts and emphasizes the role of matching the mission preferences of principals and agents in increasing organizational efficiency matching economizes on the need for high powered incentives it can also however entrench bureaucratic conservatism and resistance to innovations the framework developed in this paper is applied to school competition incentives in the public sector and in private nonprofits and the interdependence of incentives and productivity between the private for profit sector and the mission oriented sector through occupational choice jel d23 d73 h41 l31 the late twentieth century witnessed a historic high in the march of market capitalism with unbridled optimism in the role of the profit motive in promoting welfare in the production of private goods moreover this generated a broad consensus on the optimal organization of private good production through privately owned competitive firms when it comes to the provision of collective goods no such consensus has emerged debates about the relative merits of public and private provision still dominate this paper suggests a contracting approach to the provision of collective goods it focuses on two key issues how to structure incentives and the role of competition between providers at its heart is the idea that organizations that provide collective goods cohere around a mission 2 thus production of collective goods can be viewed as mission oriented

moonlighting public service and private practice we study job incentives in moonlighting when public service physicians may refer patients to their private practices some doctors in the public system are dedicated and behave sincerely but others the moonlighters are utility maximizers allowing moonlighting always enhances aggregate consumer welfare but equilibrium public care quality may increase or decrease if quality increases moonlighting improves each consumer s expected utility unregulated moonlighting may reduce consumer welfare as a result of adverse behavioral reactions such as moonlighters shirking more and dedicated doctors abandoning their sincere behavior price regulation in the private market limits such adverse behaviors in the public system and improves consumer welfare

property rights and wages the case of nursing homes in this paper we develop the implications of the property rights theory of the firm for wage determination and test the model using data from the u s nursing home industry the main theoretical prediction is that any attenuation of property rights will lead to higher wage rates for the firm s employees the empirical evidence indicates that indeed profit maximizing nursing homes do pay the lowest wage rates for given quality labor and that the stronger the cost minimizing incentives provided by medicaid reimbursement programs the lower the wage rate paid by these nursing homes

investing in reduced setups in the eoq model this paper is motivated by the observation that the japanese have devoted much time and energy to decreasing setup costs in their manufacturing processes and that there has been little in the way of a formal framework available to use to think about such efforts the object of this paper is to begin to provide such a framework the framework developed identifies only one aspect of the advantages of reducing setups namely reduced inventory related operating costs the other advantages such as improved quality control flexibility and increased effective capacity are not accounted for in this paper nevertheless substantial reductions in setups may be warranted based solely on the benefits identified in this paper the approach taken here introduces an investment cost associated with changing the current setup level and adds a per unit time amortization of this cost to the other costs identified in the standard eoq model the general problem becomes that of minimizing the sum of a convex and a concave function in two special cases the minimization can be carried out explicitly in one of these cases numerous interpretations of the results are made including comparisons of japanese and american practices for example holding other parameters constant there is a critical sales level such that investment is made in reducing setups if and only if the sales rate is above that level when such investment is made the optimal lot size is independent of the sales rate the paper also addresses the joint selection of the setup cost and the sales rate selection of the sales rate is seen as incorporating explicit production and holding costs into the classical monopolist s pricing problem an explicit solution is obtained for the model postulated

charitable motives and bidding in charity auctions research on bidding in auctions has generally relied on the assumption of self interested bidders this work relaxes that assumption in the context of charity auctions because understanding charitable motives has important implications for auction design and charities fundraising strategies this study investigates bidders specific types of charitable motives and the strength of these motives we carry out three controlled field experiments consisting of real life auctions conducted on a local internet auction site we use a novel design in which we simultaneously run charity and noncharity auctions for identical products and vary the percentage donated to charity results show that auctions with proceeds donated to charity lead to significantly higher selling prices a result due to a higher bidding by bidders with charitable motives rather than to increased bidder entry we also find that increased prices only occur when the charitable donation is a percentage of the auction revenue and that a fixed charitable donation associated with each auction has no effect on prices furthermore we find that prices are increasing in the percentage donated to charity we find considerable support for a model of voluntary shill like bidding where charitable bidders try to increase proceeds in charity auctions we also find that auctions with 25 of revenue donated to charity had higher net revenue than noncharity auctions hence companies may be able to use charity auctions as part of a corporate social responsibility strategy and at the same time increase profitability even though they donate part of the proceeds to charity

compensation in the nonprofit sector we investigate the determinants of pay in the nonprofit sector using data for 25 55 year olds from the 1994 88 current population survey outgoing rotation groups our results are consistent with the hypothesis that compensation is primarily determined in competitive markets without labor donations to nonprofit employers one implication is that nonprofit workers receive virtually the same wages as observationally equivalent employees in similar positions with profit seeking enterprises we cannot rule out the possibility of nonprofit penalties or premiums for selected groups however the differentials are generally small and competition appears to play a dominant role in nonprofit wage setting

managerial contracting and corporate social responsibility abstract this paper presents a theory of corporate social responsibility in the form of the private provision of public goods and private redistribution by a firm these social expenditures are determined by a manager operating under a compensation contract chosen by shareholders in a capital market that prices social expenditures the theory incorporates three explanations for compensation systems that encompass social performance first consumers may reward the firm for its social expenditures second managers may have personal preferences for contributing to social causes and third the shareholder clientele a firm attracts may prefer social expenditures social incentives are higher powered the more consumers reward the firm and the stronger are shareholders warm glow preferences for social expenditures profit incentives are higher powered the more consumers reward the firm but are independent of shareholder preferences when consumers reward the firm for its social expenditures firms with higher ability managers have both higher operating profits and higher social expenditures when times are good so a positive correlation is predicted in bad times however the correlation is negative except for firms with very low ability managers in very bad times where the correlation is zero

effects of discounting and demand rate variability on the eoq the economic order quantity eoq formula is probably the most well known formula in inventory theory it determines the optimal value of the ordering quantity by minimizing the average cost in an ordering cycle it is based on the assumptions that there is a fixed lead time and a constant demand rate these assumptions are usually not fulfilled in practice especially when dealing with slow moving items demand seems to fluctuate furthermore since the time between two successive orderings is often large for slow moving items discounted costs instead of average costs should be minimized in this paper we determine the optimal ordering quantity if demand is modelled by a poisson process and the expected discounted costs are minimized we also analyze the case where demand is uniform and or the average cost criterion is used we give graphical presentations of the optimal ordering quantities besides easily determining the optimal values these allow us to show what the effects of changing the objective function and of changing the demand distribution are we derive a simple discounted cost ordering quantity formula denoted by eoq d for slow moving items we show that for items with a small demand rate and high fixed ordering costs the eoq d is much closer to the optimal discounted cost ordering quantity than the traditional eoq formula c 1998 elsevier science b v all rights reserved

managerial talent motivation and self selection into public management the quality of public management is a recurrent concern in many countries calls to attract the economy s best and brightest managers to the public sector abound this paper studies self selection into managerial and non managerial positions in the public and private sector using a model of a perfectly competitive economy where people differ in managerial ability and in public service motivation we find that if demand for public sector output is not too high the equilibrium return to managerial ability is always highest in the private sector as a result relatively many of the more able managers self select into the private sector since this outcome is efficient our analysis implies that attracting a more able managerial workforce to the public sector by increasing remuneration to private sector levels is not cost efficient

economic evaluation of leadtime reduction abstract many companies have systematically worked on controlling and reducing leadtimes and have achieved impressive improvements further reduction of leadtime by such companies can only be achieved by relatively expensive projects in this paper the economic evaluation of such projects is discussed two important requirements for an economic evaluation of a project proposal for leadtime reduction are presented the first requirement is to carefully analyse the consequences of leadtime reduction a team that analyses the consequences should represent a variety of business functions e g marketing production logistics and engineering the second requirement is to use the right kind of economic criterion this criterion should be based on future cash flows caused by the leadtime reduction it will be demonstrated that product costs are inappropriate to evaluate the economic consequences of leadtime reduction this suggests that a decision about leadtime reduction should be made at the organisational level where managers are responsible for profits not just for product costs

agency costs in environmental not for profits we examine the behavior of not for profits using utility maximization this leads to testable hypotheses regarding the costs of agency associated with the activities of not for profits our tests are similar to those previously employed regarding not for profit objectives but our interpretation is different our empirical test uses data on environmental groups unlike previous studies biased toward a finding of service maximization we account for endogenous explanatory variables a weak statement of our results is that managers of environmental groups derive positive marginal utility from expenditures for purposes other than providing services there may also be empirical support for a stronger conclusion

dynamic version of the economic lot size model this article originally appeared in management science october 1958 volume 5 number 1 pp 89 96 published by the institute of management sciences a forward algorithm for a solution to the following dynamic version of the economic lot size model is given allowing the possibility of demands for a single item inventory holding charges and setup costs to vary over n periods we desire a minimum total cost inventory management scheme which satisfies known demand in every period disjoint planning horizons are shown to be possible which eliminate the necessity of having data for the full n periods

the dilemma of accountability for professionals a challenge for mainstream management theories professional institutions are increasingly confronted by fiscal constraints and political pressures to improve and increase their accountability in a competitive consumer driven market accordingly the need to ensure efficiency and accountability is of strategic importance this article reports on a qualitative study of medical professionals that assessed the utility of financial incentives and external control methods derived from agency theory to ensure accountability of professionals the authors argue that approaches derived from stewardship and institutional theories can extend the principal agent perspective to sustain greater social and ethical accountability

competition and equity in health care markets we provide a model where hospitals compete on quality under fixed prices to investigate how hospital competition affects i quality differences between hospitals and as a result ii health inequalities across hospitals and patient severities the answer to the first question is ambiguous and depends on factors related to both demand and supply of health care whether competition increases or reduces health inequalities depends on the type and measure of inequality health inequalities due to the postcode lottery are more likely to decrease if the marginal health gains from quality decrease at a higher rate whereas health inequalities between high and low severity patients decrease if patient composition effects are sufficiently small we also investigate the effect of competition on health inequalities as measured by the gini and the generalised gini coefficients and highlight differences compared to the simpler dispersion measures

the social role of not for profit organizations hospital provision of charity care during the 1980s the state of new york shifted from a straight block grant to a matching grant method for reimbursing hospitals with the matching rate varying from 0 to 75 percent across years these changes allow estimation of pure income and price effects for hospitals supply of uncompensated care charity and bad debts the price efrect is positive and significant but no income effect was found hospitals in more concentrated markets provide more charity care as do teaching hospitals and the presence of public hospitals in a market reduces private hospitals provision of charity care

towards an integrated accounting framework for manufacturing improvement abstract the accounting world is confronted with criticism on the relevance of its practices this has led to improved allocation methods and improved methods for operational decision making until now few attempts are made to integrate these new accounting methods this paper presents an integrated accounting information framework to measure the economic consequences of manufacturing improvement decisions the notions resource consumption and resource spending are connected to build the framework within this context effectiveness efficiency and productivity improvement are redefined a project portfolio gives operations management the possibility to rank improvement projects based on magnitude timing and economic results

competitive insurance markets with two unobservables i study a screening game in a competitive insurance market in which insurance customers differ with respect to both accident probability and degree of risk aversion it is shown that indifference curves of customers may cross twice thus the single crossing property does not hold when differences in risk aversion are sufficiently large firms cannot use policy deductibles to screen high risk customers types may be pooled in equilibrium or are separated by raising premiums above actuarially fair levels this leads to excessive entry of firms in equilibrium