Question

Discuss Failure Theories (market theory) and Thrust theories in the non-profit sector. Please list some examples for both.

Answer 1

Failure Theories in the non-profit sector: It explains the ability to overcome that failure in which public goods are involved and information asymmetries are involved. The failure can be unable to deliver the product in the situation of heterogeneity demand and when the organization abuse information asymmetries.

Due to the lack of ability of the government and the private sector to deliver the product/services in the situation of heterogeneity demand, people start looking for a non-profit organization who can satisfy their needs.

Examples: Suppose there is a profit-making organization which shows no interest in their product/services or when the customers think that the company won't be able to deliver the product and service with accountability and equity or people start noticing that this organization is not providing enough information to them, then non-profit organization emerges.

Thrust theories in the non-profit sector. This theory is based on the claim that non-profit organizations are becoming more trustworthy since they are delivering responsive and non-exploitative services as well as not trying to abuse information asymmetries

Examples: Suppose there are two organizations. One is a non-profit organization which is very responsive and always share correct and full information to their customer whenever customers require. And the second organization is a profit making organization whose main aim is to make money rather giving better service and providing correct information. By comparing the two organization people will start preferring the non-profit organization since that is looking more trustworthy than the profit-making organization.