Are Donors Afraid of Core Costs? Economies of Scale and Contestability in Charity Markets*

Perroni, Carlo; Pogrebna, Ganna; Sandford, Sarah; Scharf, Kimberley

Abstract

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 trade offs between efficiency and perceived risk can lead to inefficient technology adoption.

Citation

Perroni, C., Pogrebna, G., Sandford, S., & Scharf, K. (2019). Are Donors Afraid of Core Costs? Economies of Scale and Contestability in Charity Markets*. Economic Journal, 129(622), 2608-2636. https://doi.org/10.1093/ej/uez006

• Journal Article Type: Article
• Online Publication Date: May 24, 2019
• Publication Date: Aug 1, 2019
• Deposit Date: Oct 29, 2024
• Publicly Available Date: Oct 29, 2024
• Journal: The Economic Journal
• Print ISSN: 0013-0133
• Electronic ISSN: 1468-0297
• Publisher: Oxford University Press
• Peer Reviewed: Peer Reviewed
• Volume: 129
• Issue: 622
• Pages: 2608-2636
• DOI: https://doi.org/10.1093/ej/uez006
• Public URL: https://nottingham-repository.worktribe.com/output/41136521
• Publisher URL: https://academic.oup.com/ej/article/129/622/2608/5498293