Advertisement

Constitutional Political Economy

, Volume 16, Issue 3, pp 249–276 | Cite as

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

Article

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-interest. We assume that individuals desire to comply with the prescriptions of a universally recognised moral principle conditionally on the expectation of similar compliance by other agents. This principle will shape the constitution 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 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 

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Andreoni, J., Miller, J. 1993Rational Cooperation in the Finitely Repeated Prisoner’s Dilemma: Experimental EvidenceEconomic Journal10357085Google Scholar
  2. Anderson, P., Arrow, K., and Pines, D. (eds.) (1988) ``The Economy as an Evolving Complex System.'' Proceedings of the Evolutionary Paths of the Global Economy Workshop, Reading, MA:Addison-WesleyGoogle Scholar
  3. Ben Ner, A.Putternam, L. eds. 1998Economics, Values, and OrganizationCambridge University Press, pp.Cambridge369Google Scholar
  4. Bernheim, B. 1994A Theory of ConformityJournal of Political Economy10284177CrossRefGoogle Scholar
  5. Binmore, K., Gale, J., Samuelson, L. 1995Learning to be Imperfect: The Ultimatum GameGames and Economic Behavior85690CrossRefGoogle Scholar
  6. Binmore, K. 1997Just Playing: Game Theory and the Social Contract (volume 2)The MIT PressCambridge, MAGoogle Scholar
  7. Binmore, K. 1994Playing Fair: Game Theory and the Social Contract (volume 1)The MIT PressCambridge, MAGoogle Scholar
  8. Brennan, G., Hamlin, A. 2002Expressive ConstitutionalismConstitutional Political Economy13299311CrossRefGoogle Scholar
  9. Brennan, G., Lomasky, L. 1993Democracy and DecisionCambridge University PressCambridgeGoogle Scholar
  10. Brock, H. 1979A Game Theoretical Account of Social JusticeTheory and Decision1123965CrossRefGoogle Scholar
  11. Broome, J. 1999Ethics Out of EconomicsCambridge University PressCambridgeGoogle Scholar
  12. Buchanan, J. 1975The Limits of LibertyChicago University PressChicagoGoogle Scholar
  13. Buchanan, J. 1988Contractarian Political Economy and Constitutional InterpretationAmerican Economic Review7813539Google Scholar
  14. Charness, G., and Rabin, M. (2000) Social Preferences: Some Simple Tests and a New Model, Mimeo, University of California at BerkeleyGoogle Scholar
  15. Croson, R. (1999) ``Theories of Altruism and Reciprocity: Evidence from Linear Public Good Games,'' Discussion Paper, Wharton School, University of PennsylvaniaGoogle Scholar
  16. Dawes, R. M., Thaler, R. 1988CooperationJournal of Economic Perspectives218797Google Scholar
  17. Dawes, R., Kragt, A., Orbell, J. 1988Explaining Discussion Induced CooperationJournal of Personality and Social Psychology5481119CrossRefGoogle Scholar
  18. Falk, A., and Fischbacher, U. (1999) ``A Theory of Reciprocity.'' Institute for Empirical Research in Economics, Working Paper, University of ZurichGoogle Scholar
  19. Fehr, E., Gachter, S. 2000Cooperation and Punishment in Public Goods ExperimentAmerican Economic Review9098094Google Scholar
  20. Fehr, E., and Schmidt, K. (2001) Theories of Fairness and Reciprocity–Evidence and Economic Applications. Institute for Empirical Research in Economics, Working Paper, University of ZurichGoogle Scholar
  21. Gauthier, D. 1986Morals by AgreementClarendon PressOxfordGoogle Scholar
  22. Geanakoplos, J., Pearce, D., Stacchetti, E. 1989Psychological Games and Sequential RationalityGames and Economic Behavior16079CrossRefGoogle Scholar
  23. Grimalda, G., and Sacconi, L. (2002). The Constitution of The Non-profit Enterprise: Ideology, Reciprocity, LIUC Papers Series, No. 105Google Scholar
  24. Guth, W., Kliemt, H., Ockenfels, A. 1982An Experimental Analysis of Ultimatum BargainingJournal of Economic Behavior and Organisation336788CrossRefGoogle Scholar
  25. Hansmann, H. (1988) “Ownership of the Firm.” Journal of Law, Economics and Organisation 4: 267--304Google Scholar
  26. Hansmann, H. 1980The Role of Non-profit EnterpriseYale Law Journal89835901Google Scholar
  27. Harsanyi, J., (1977) Rational Behavior and Bargaining Equilibrium in Games and Social Situations. Cambridge: Cambridge University PressGoogle Scholar
  28. Kreps, D., Milgrom, P., Roberts, J., Wilson, R. 1982Rational Cooperation in Finitely Repeated Prisoners DilemmaJournal of Economic Theory2724552CrossRefGoogle Scholar
  29. Lewis, David 1969Convention: A Philosophical StudyHarvard University PressCambridge, MAGoogle Scholar
  30. Nelson, R., Winter, S. 1982An Evolutionary Theory of Economic ChangeHarvard University PressCambridge, MAGoogle Scholar
  31. Rabin, M. 1993Incorporating Fairness into Game TheoryAmerican Economic Review8312811302Google Scholar
  32. Rose-Ackerman, S. 1996Altruism, Non-profits, and Economic TheoryJournal of Economic Literature3470128Google Scholar
  33. Rose Ackerman, S. 1987Ideals Versus Dollars: Donors, Charity Managers, and Government GrantsJournal of Political Economy9581023CrossRefGoogle Scholar
  34. Sacconi, L. (2002) The Efficiency of the Non Profit Enterprise: Constitutional Ideology, Conformist Preferences and Reputation, LIUC Papers Series No. 111 (forthcoming). In: Hogdson B., (ed.) The Invisible Hand and the Common Good, Proceedings of the SEEP Conference. Berlin: Springer VerlagGoogle Scholar
  35. Sacconi, L. (2001) Incomplete Contracts and Corporate Ethics: A Game Theoretical Model Under Fuzzy Information. LIUC Papers Series No. 91Google Scholar
  36. Sacconi, L. 2000The Social Contract of the FirmSpringerBerlinGoogle Scholar
  37. Sacconi, L. 1991Etica Degli Affari, Individui, Imprese e Mercati Nella Prospettiva Dell’etica RazionaleIl SaggiatoreMilanoGoogle Scholar
  38. Scanlon, T. M. 2001Symposium on Amartya Sen’s Philosophy: 3 Sen and ConsequentialismEconomics and Philosophy173950CrossRefGoogle Scholar
  39. Schelling, T. C. 1960Strategy of ConflictHarvard University PressCambridge, MAGoogle Scholar
  40. Sen, A 2001Symposium on Amartya Sen’s Philosophy: 4 ReplyEconomics and Philosophy175166 (forthcoming)CrossRefGoogle Scholar
  41. Sugden, R. (2000)``The Motivating Power of Expectations.''Nida-Rumelin, J.Spohn, W. eds. Rationality, Rules and StructureKluwer,Amsterdam 10329Google Scholar
  42. Sugden, R. (1998)Normative Expectations: The Simultaneous Evolution of Institutions and Norms.Ben-Ner, A.Putterman, L. eds. Economics, Values, and OrganizationCambridge University Press,Cambridge 73100Google Scholar
  43. Sugden, R. 1986The Economics of Welfare, Rights and Co-operationBasil BackwellOxfordGoogle Scholar
  44. Verbeek, B. 2001Consequentialism, Rationality and the Relevant Description of OutcomesEconomics and Philosophy17181205CrossRefGoogle Scholar
  45. Weisbrod, B. 1988The Non Profit EconomyHarvard University PressCambridge, MAGoogle Scholar

Copyright information

© Springer Science+Business Media, Inc. 2005

Authors and Affiliations

  1. 1.Centre for the Studey of Globalisation and Regionalisation(CSGR)University of WarwickCoventryUK
  2. 2.Department of Economics, University of Trento and Econometica (inter university center)university milano-BicoccaItaly

Personalised recommendations