Incentives for Anticompetitive Behavior by Public Enterprises (original) (raw)

Public Monopoly, Mixed Oligopoly and Productive Efficiency

Australian Economic Papers, 2002

In general, the introduction of competition into the public sector seems to lead to higher costefficiency in service production. However, there are examples of substantial cost increases in some areas. In this paper, using a mixed oligopoly model, we investigate the effects of deregulation on the cost-reducing incentives of a public firm. Our results show that a firm that is a public monopoly has greater incentive to conduct cost-reducing investment than a public firm within mixed oligopoly market.

Anticompetitive consequence of the nationalization of a public enterprise in a mixed duopoly

I investigate a mixed duopoly of a homogeneous product market. A welfare-maximizing public enterprise competes against a profit-maximizing private one in the Bertrand fashion. I find that the mixed duopoly yields a collusive outcome or limit pricing by the private firm deterring the monopoly by the public firm. This result implies that the goodwill (welfare-maximizing objective) of the nationalized firm may result in the worst outcome (collusive outcome) for social welfare. I also find that both the two possible outcomes in mixed Bertrand competition yield a smaller total output and a larger profit for the private firm than mixed Cournot competition. JEL classification numbers: D43, H44, L32

Mixed oligopoly, public firm behavior, and free private entry

Economics Letters, 2012

We analyze a mixed oligopoly with free entry by private firms, assuming that a public firm maximizes an increasing function of output, subject to a break-even constraint. We establish an irrelevance result: whenever a mixed oligopoly is viable, then aggregate output, aggregate costs and welfare are the same with and without the public firm. However, replacing a viable mixed oligopoly with a public monopoly yields higher net welfare. Implications for privatization policy are suggested.

2000.“The Evidence on Government Competition

Society clearly benefits when businesses compete. The social benefits of government competition are still being debated, however. A large economics literature has sprung up to explore the premise that governments facing intense competitive pressure behave differently than do governments facing little or no competition. Lori Taylor examines the literature on government size, service quality, and productivity. She concludes that an ill-defined market for government, together with inconsistent and potentially inappropriate measuring sticks, raises the strong possibility that competition has been mismeasured in much of the literature on competition and government. Despite these flaws, the literature strongly supports one striking conclusion--competition improves public schools. Almost across the board, researchers have found that school spending is lower, academic outcomes are better, and school district efficiency is higher where parents have more choice of educational provider. Furthe...

On Public Inefficiencies in a Mixed Duopoly

2009

The aim of this paper is to investigate the welfare effect of a change in the public firms objective function in oligopoly when the government takes into account the distortionary effect of rising funds by taxation (shadow cost of public funds). We analyze the impact of a shift from welfare-to profit-maximizing behaviour of the public firm on the timing of competition by endogenizing the determination of simultaneous (Nash-Cournot) versus sequential (Stackelberg) games using the game with observable delay proposed by . Differently from previous work that assumed the timing of competition, we show that, absent efficiency gains, instructing the public firm to play as a private one never increases welfare. Moreover, even when large efficiency gains result from the shift in public firm's objective, an inefficient public firm that maximizes welfare may be preferred.

Private v. public antitrust enforcement: A strategic analysis

Journal of Public Economics, 2008

We compare private and public enforcement of the antitrust laws in a simple strategic model of antitrust violation and lawsuit. The model highlights the tradeoff that private firms are initially more likely than the government to be informed about antitrust violations, but are also more likely to use the antitrust laws strategically, to the disadvantage of consumers. Assuming coupled private damages, if the court is sufficiently accurate, adding private enforcement to public enforcement always increases social welfare, while if the court is less accurate, it increases welfare only if the government is sufficiently inefficient in litigation. Pure private enforcement is never strictly optimal. Public enforcement can achieve the social optimum with a private subsidy for public lawsuit that induces efficient information revelation. Private enforcement can also achieve the social optimum with private damages that are efficiently multiplied and decoupled.

Price competition between subsidized organizations

Journal of Economics, 2013

Many organizations compete for customers while at the same time receiving substantial subsidies from e.g. the government. In this paper, we study the effects of two commonly observed subsidy systems on price-competing firms. First, we show that, for a given total budget available for subsidies, an open-ended per-unit subsidy results in fiercer price competition (lower prices and higher output) than a closed-ended subsidy allocated according to the firms' market shares. Second, which system generates the highest profits depends on the size of the subsidy. Moreover, welfare is higher under the open system for all but very high subsidy levels. Third, a market-share based subsidy makes collusive behavior between firms much harder. Our results, therefore, suggest a potential trade-off between short-run and long-run objectives. They may have important policy implications for the design of subsidy systems in, among others, education and the arts, where an important goal of the government is to widen the degree of participation.