Eleanor Brown and Al Slivinski
We provide an overview of theoretical research on markets in which for-profit and nonprofit firms compete. We discuss how specific notions of altruism – whether it is scarce, whether it is pure or warm-glow – affect outcomes in such markets. Since the nonprofit organizational form carries with it both advantages and disadvantages relative to for-profits, research devoted to explaining the conditions under which the two can coexist is discussed, and we then move on to show the kinds of predictions of firm behavior that are made by models in which such coexistence can occur. The chapter concludes with a discussion of where research on these questions seems to be headed, and the possible implications of the recent development of hybrid forms allowing firms to incorporate as for-profit with a declared social mission.