Abstract
In the context of mixed markets, Matsumura and Kanda (J Econ 84(1): 27–48, 2005) show that social welfare in free entry equilibrium is maximized when there exists a public firm in the market. En passant, these authors state that this outcome is connected to the entry-deterring influence of a public firm. In this way, they counter-act the excess entry problem of Mankiw and Whinston (Rand J Econ 17(1): 48–58, 1986). We explain this result arguing that the state-owned firm can be an indirect instrument to regulate entry. In fact, under free entry equilibrium welfare may be greater with the presence of a public firm than with a social planner.
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Brandão, A., Castro, S. State-owned enterprises as indirect instruments of entry regulation. J Econ 92, 263–274 (2007). https://doi.org/10.1007/s00712-007-0286-y
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DOI: https://doi.org/10.1007/s00712-007-0286-y