The Constitution of the Not-For-Profit Organisation: Reciprocal Conformity to Morality

We investigate the link between individual motivations and economic organisations by focusing on the case of non-profit firms. First, we provide a model of individual behaviour that allows for agents to have motivations different from self-interest. We assume that individuals desire to comply with the prescriptions of a universally recognised moral principle conditionally on the expectation of similar compliance by other agents. This principle will shape the constitution of the non-profit organisation. Second, we study a simple ‘production game’ where a ‘for-profit’ and a ‘non-profit’ equilibria both exist. In the former, self-interested considerations prevail, so that agents implement the free-market standard; conversely, in the latter, conformist preferences are dominant, so that players act in such a way that the moral principle is fulfilled. The non-profit organisation is characterised in terms of a ‘social contract’ between the founders of the firm and its stakeholders. We also point out that the structure of the ‘psychological game’ underlying the interaction is akin to a co-ordination problem, so that the possibility of co-ordination failures underscores the risk of ‘distorting’ individual dispositions in the shift from the ‘micro’ level of the individuals to the ‘macro’ level of the organisation as a whole. Copyright Springer Science+Business Media, Inc. 2005