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After the introduction of public long-term care insurance in 2000, for-profit facilities were allowed to enter the at-home care market in Japan, where nonprofits are dominant. However, according to a popular hypothesis called the “contract failure, ” nonprofit centers are preferred over for-profit counterparts due to an asymmetry of information. If this is the case, a change in competition policy in the long-term care market would not work. This study takes advantage of unique data to examine directly whether a choice in type of management is biased toward nonprofits, as the contract failure hypothesis predicts. Our empirical findings are as follows. The share of users of for-profit providers occupies about 40 percent of the at-home care. In this sense, the entrance policy of proprietary firms after the introduction of public long-term care insurance has been welcomed. Regarding the preference between nonprofit and for-profits, households with higher car