Incentives for Anticompetitive Behavior by Public Enterprises
24 Pages Posted: 4 Aug 2003 Last revised: 2 Nov 2009
Date Written: 2003
We examine the competitive behavior of a public enterprise that does not seek solely to maximize its profit. We find that despite a reduced focus on profit, a public enterprise may have stronger incentives to pursue anticompetitive activities than does a private, profit-maximizing firm. These activities include setting prices below marginal cost, raising the operating costs of existing rivals, erecting entry barriers to preclude the operation of new competitors, and circumventing regulations designed to foster competition.
Keywords: public enterprises, anticompetitive activities, barriers to entry, setting prices, marginal cost, anticompetitive behavior
JEL Classification: L44, H10, K21
Suggested Citation: Suggested Citation