This paper derives the decision to found a nonprofit firm as the equilibrium outcome of a multistage game among individuals who would like a public good to be provided. The model predicts that if individuals will voluntarily contribute towards provision of the public good, then it is in the...

Conventional wisdom regarding nonprofit firms is that they are inefficient, due to the absence of a profit motive. However, the costs and product quality realized by profit-taking firms is determined by how well those firms deal with a host of internal incentive and information issues. A similar...