In some industries, private firms compete with non-profit organizations. An example is the hospital industry in the USA, where hospitals owned and run by private companies compete with hospitals owned by foundations, charities and local governments. Private hospitals and public hospitals face the same make-or-buy decisions: services such as laundry, maintenance, restaurant, physical therapy, laboratory and pharmacy can be bought from outside suppliers or supplied in-house.

Transaction cost economics predicts that transactions with high levels of asset specificity, uncertainty/complexity and frequency will be supplied in-house, whereas transactions with low levels of asset specificity, uncertainty/complexity and frequency will be bought from outside suppliers. A recent study examined if that was really the case. The study also examined whether or not the prediction from transaction cost economics was true for both private and non-profit hospitals. Do you expect the prediction to be equally true for private and non-profit hospitals? Why?

(Economic approaches to organization, Chapter 9, Transaction cost economics)