Asymmetrical information in the provision of human services: an empirical investigation of contract failure theory

In this article, we empirically investigate the validity of the contract failure arguments as applied to a segment of the child care industry. However, prior research has focused upon actual quality differences between nonprofit and for-profit providers whereas the theory is concerned with consumers' perceptions of quality differences. In the current study, we examine both consumers′ perceptions and actual performance in testing the theory. In general, the data provide support for contract failure.