The Constitution of the Non-Profit Enterprise: Ideals, Conformism and Reciprocity

Universita Cattaneo LIUC Working Paper No. 115

31 Pages Posted: 25 Jun 2003

See all articles by Lorenzo Sacconi

Lorenzo Sacconi

University of Trento - Department of Economics and Management

Gianluca F. Grimalda

University of Warwick - Centre for the Study of Globalisation and Regionalisation

Date Written: November 2002

Abstract

We provide an account of the non profit enterprise based on the motivations of the agents involved. Our main idea is that these are ex-post motivated by both self-interest and a conditional willingness to conform to their ex ante accepted constitutional ideology, which are weighed up in a comprehensive utility function. Ideology is shaped as the result of a hypothetical 'social' contract between the relevant figures participating in the venture, in particular an entrepreneur, a worker, and a consumer who acts as a dummy beneficiary in the ex-post stage. It can thus be defined as a normative principle of fairness that boils down to a distributive social welfare function defined over the outcomes of a game, which permits to order them according to their conformity to the constitutional ideology. For conformist preferences depend upon expectations of reciprocal conformity to a normative principle, defined on social states described in as much they conform to an ideal, then the agents' model of choice asks for the adoption of the psychological games approach, where payoff functions range over not only the players' strategies but also their beliefs. If the conformist prompt to action is sufficiently strong then the outcome in which both the active agents perform an action improving the quality of the good with respect to the free market standard, thus maximising the surplus of the consumers, results in a psychological Nash equilibrium of the game. We associate this outcome, and the corresponding norm of behaviour, with the constitution of the non profit enterprise. We also show that the structure of the interaction is a coordination game, thus calling for the necessity of devices such as codes of ethics to solve the coordination problem.

Keywords: Non Profit Organisations, Psycological Games, Confromistic preferences, Ethics

JEL Classification: D6, C72, L3

Suggested Citation

Sacconi, Lorenzo and Grimalda, Gianluca F., The Constitution of the Non-Profit Enterprise: Ideals, Conformism and Reciprocity (November 2002). Universita Cattaneo LIUC Working Paper No. 115. Available at SSRN: https://ssrn.com/abstract=402300 or http://dx.doi.org/10.2139/ssrn.402300

Lorenzo Sacconi (Contact Author)

University of Trento - Department of Economics and Management ( email )

via Inama 5
I-38100 Trento
Italy

Gianluca F. Grimalda

University of Warwick - Centre for the Study of Globalisation and Regionalisation ( email )

Coventry CV4 7AL, CV4 7AL
United Kingdom
+44 (0)24 7657 4424 (Phone)
+44 (0)24 7657 2548 (Fax)

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