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For-profits find it difficult to exist in such markets because the primary source of their funding would have to be donations and gifts, and donors are reluctant to donate to these enterprises, recognizing the potential for their contributions to flow into organizational profits and dividends rather than increased output (Hansmann 1980). Competition between for-profits and nonprofits is also unlikely in situations where excludable goods or services are produced and individuals receiving the Competition, commercialization, and organizational structures 29 intended output cannot afford to pay: Housing the homeless, health care for the poor, and youth services to indigents are cases where competition is likely to be exclusively among nonprofits.

Society cannot have it both ways. We cannot expect nonprofits' outputs to increase if their access to revenue is restricted. At present, public policy is permissive in its regulations as they affect nonprofits' access to commercial markets. However, the disadvantages of having nonprofits act increasingly like private firms are considerable. Public-policy makers need to understand how the ability of nonprofits to achieve their social goals is related to their access to revenue and, more particularly, their involvement with the sale of private goods.

Availability of substitute products or services. Substitutes for services also affect competition in exclusively nonprofit markets by influencing the degree of monopoly power a nonprofit provider can wield. The fact that substitute services are available influences the price that nonprofit administrators can charge third parties and the way they make their appeal to donors. Availability of close substitutes also puts pressure on the administrators to reduce program costs. Drug-abuse services are provided largely by nonprofits on both an inpatient and an outpatient basis; these substitutes limit inpatient providers' ability to obtain funds by raising prices, lest payers shift to outpatient providers, and vice versa.

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