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

Abstract

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-interested ones. We assume that individuals desire to comply with the prescriptions of a universally recognised moral principle conditionally on the expectation of alike compliance by other agents. This principle will shape the constitutive ideology 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 then 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.

Keywords: Non-profit, non-self-interested motivations, conformism, reciprocity, ideology

JEL Classification: L31, D11, D63, Z13