Pricing
and Rationing by Nonprofit
Organizations with Distributional Objectives
By Richard Steinberg and
Burton A. Weisbrod
Abstract
The growing commercial activities of nonprofit charities, hospitals,
educational institutions, arts organizations, day-care centers,
nursing homes, and religious organizations have led many to question
the legitimacy of the nonprofit designation and the concomitant
tax and regulatory advantages conferred upon the sector. If nonprofit
organizations are engaging in commercial activity, it is easy to
regard them as simply for-profits-in-disguise. However, there are
many varieties of commercial activity. This chapter focuses on the
ways in which nonprofit organizations and private firms can be expected
to differ in their use of various pricing and other mechanisms through
which their goods and services are distributed. Unlike for-profits,
nonprofits may have a variety of distributional and other Ôbonoficing'
objectives and they operate under different legal constraints. We
illustrate a wide variety of ways in which distributional goals
might be pursued, each suggesting a testable implication.
Richard Steinberg, Department
of Economics, Indiana University/Purdue University of Indiana Burton A. Weisbrod, Department of Economics, Northwestern
University
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