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This article explores the reasons for the current dominance of the nonprofit form in the high-culture performing arts, and concludes that this development is a response to the need for price discrimination in that sector. The article develops a model of a nonprofit performing arts organization based on this analysis, and employs the model to explore, first, the consequences to be expected if such an organization adopts any of various plausible objective functions, and second, the circumstances in which subsidies to such an organization are justified and the way in which such subsidies should be structured.
Henry Hansmann (Thu,) studied this question.