Do Not-For-Profit Firms Behave Differently?

Wed May 30 16:24:38 EDT 2007

In the area of antitrust and competition policy, the treatment of not-for-profit firms has been the subject of debate and commentary for decades. Legal discussions often focus on antitrust liability and the appropriate application of the antitrust laws to not-for-profit firms. The economic debate is equally spirited. Do not-for-profit firms behave differently? Does the conventional price-concentration paradigm hold for not-for-profit firms?

This chapter from Economics of Antitrust: Complex Issues In a Dynamic Economy discusses the theoretical and empirical research on the issue, which, for the most part, has been analyses of ownership structure and competition in the hospital service and health insurance industries. The author finds that differences in objectives do not mean that for-profit and not-for-profit firms will make different economic decisions. One important reason is that market forces matter: in competitive markets, for-profit and not-for-profit firms tend to behave similarly. Moreover, economic theory suggests that if there are differences in behavior, they would appear in more concentrated markets. However, whether there is, in fact, a difference is an empirical issue that will vary from market to market.