Endogenous production technology in a public goods enterprise

Purpose – Motivated by new models of nonprofit organizations, we study a voluntary contributions environment in which the productivity of the public goods process is chosen endogenously by a manager. The experimental treatments incorporate two institutions of transparency in the organization, which we conjecture will assist the manager in achieving an outcome superior to the standard free-riding prediction. Methodology – The chapter uses the methodology of laboratory experimental economics. Findings – The findings demonstrate that transparency institutions can be important for assisting the manager and the stakeholders achieve relative stable and efficient outcomes. Limitations – We discuss obvious areas for further investigation including environments in which firm productivity is only stochastically related to the decisions of the manager. Practical and Social Implications – The chapter is oriented to real-world issues in the organization of nonprofit enterprises, which were a once ubiquitous and now re-emerging source of charitable activity. The chapter is written so that it should be accessible to informed practitioners in nonprofit organizations. Originality – The study of endogenous environments and institutions in the provision of charitable and public goods is a relatively new advance and is indeed the theme of Research in Experimental Economics, Volume 13, “Charity with Choice.”