We study contestability in charity markets where non-commercial, not-for-profit providers supply a homogeneous collective good through increasing-returns-to-scale technologies. Unlike in the case of for-profit competition, the absence of price-based sales contracts for charities means that fixed costs can translate into entry barriers, protecting the position of an inefficient incumbent; or, conversely, they can make it possible for inefficient newcomers to contest the position of a more efficient incumbent. Evidence from laboratory experiments show that fixed-cost driven tradeoffs between efficiency and perceived risk can lead to inefficient technology adoption.
|Number of pages||29|
|Journal||The Economic Journal|
|Early online date||24 May 2019|
|Publication status||Published - Aug 2019|
ASJC Scopus subject areas
- Economics and Econometrics