We analyze implications of market size for market structure(external)
in the charity sector. While a standard model of oligopolistic
for-profit competition predicts a positive relationship between market
size and firm size, our analogous model of competition between
prosocially motivated charities predicts no such correlation. If
charities are biased towards their own provision, a positive association
between market size and provider size can arise. We examine these
predictions empirically for six different local charity markets. Our
empirical findings suggest that charities do not solely pursue prosocial
objectives, and that increased competition in the charity sector can
lead to rationalization in provision.