A Platform Theory of Nonprofit Pricing and the Nonprofit Platform Lerner Index

This paper develops a novel framework for nonprofit pricing by conceptualizing nonprofits as multi-sided platforms (MSPs) that mediate exchanges between clients and donors. It introduces the Nonprofit Platform Lerner Index (NPLI), a tool that helps nonprofit managers optimize pricing by accounting for both client-price elasticity and donor-side cross-platform effects. The framework demonstrates how nonprofits can strategically leverage donor market power to subsidize client prices, including scenarios where prices fall below marginal cost or become negative. The study reconceptualizes donor engagement activities as core production inputs rather than overhead costs, aligning them with mission-critical objectives. It also explores policy implications, offering insights into antitrust considerations in donor markets. The NPLI provides regulators and managers with a quantitative tool to measure market power across donor and client markets. Future research avenues include empirical validation and applications to nonprofit governance and stakeholder management.