COMPETITION AND MERGERS AMONG NONPROFITS

Should mergers among nonprofit organizations be regulated differently than mergers among for-profit firms? The relevant empirical literature is highly controversial, the theoretical literature is scarce. I analyze the ques-tion by modeling duopoly competition with quality-differentiated goods. I compare welfare effects of mergers between firms with the effects of merg-ers between nonprofits dominated by consumers, workers, suppliers, and pure donors respectively. I find that mergers both among firms and among most types of nonprofits do not increase welfare. Mergers among consumer-dominated nonprofits, however, can improve welfare. These results imply for competition law and regulation that “nonprofit ” might be too crude a label for organizations with varying goals. Consequently, mergers among certain nonprofit organizations should not necessarily be treated in the same way as mergers among for-profit firms – a notion that is absent in current merger guidelines both in the US and the EU