Coexistence of nonprofit, for-profit and public sector institutions

If nonprofit organizations are superior institutions in resolving informational asymmetry and resulting contract failure, why do nonprofit (NPs), for-profit (FPs) and government/public institutions (GPs) survive in the same industry? This article explicitly models the nonconvex budget set for the consumer that arises through the juxtaposition of the inefficiencies and contract failures that occur in the three sectors. Because the consumer is willing to trade quality for efficiency and price, varying market shares for NPs, FPs and GPs can exist in the same industry. The theory offered complements the functionalist explanation of the existence of nonprofits advanced by Weisbrod and Hansmann using a micro-analysis.