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Non-Profit Firms and the Provision of Durable Goods

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  • Gregory E. Goering
Abstract
A simple linear demand two-period durable goods is analyzed where the durable good is provided by private non-profit organization (NPO). A novel flexible objective function is utilized that allows for both the �commercial� and �social concern� aspects of NPOs. The model indicates NPO�s will not typically provide the efficient cost-minimizing durability in sales markets. Indeed, if the NPO cannot credibly commit to its own stakeholders it will manufacture output with less durability than a pure for-profit seller. We show the NPO�s level of commitment ability and social concern with its stakeholders is crucial for determining the amount of �planned obsolescence� that would prevail if NPOs expand into durable goods markets. Interestingly, the social concern commonly cited for the existence of NPOs, is a double edged sword since it may cause more or less product obsolescence.

Suggested Citation

  • Gregory E. Goering, 2006. "Non-Profit Firms and the Provision of Durable Goods," Departmental Working Papers 2006-16, Department of Economics, Louisiana State University.
    • Handle: RePEc:lsu:lsuwpp:2006-16
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    File URL: https://www.lsu.edu/business/economics/files/workingpapers/pap06_16.pdf
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    References listed on IDEAS

    as
    1. Swan, Peter L, 1970. "Durability of Consumption Goods," American Economic Review, American Economic Association, vol. 60(5), pages 884-894, December.
    2. Butz, David A, 1990. "Durable-Good Monopoly and Best-Price Provisions," American Economic Review, American Economic Association, vol. 80(5), pages 1062-1076, December.
    3. Richard Schmalensee, 1974. "Market Structure, Durability, and Maintenance Effort," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(2), pages 277-287.
    4. Waldman, Michael, 1996. "Durable Goods Pricing When Quality Matters," The Journal of Business, University of Chicago Press, vol. 69(4), pages 489-510, October.
    5. Gregory Goering & Michael Pippenger, 2002. "Durable Goods Monopoly and Forward Markets," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 9(2), pages 271-282.
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