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Incentives for Anticompetitive Behavior by Public Enterprises

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Abstract

We examine the competitive behavior of a public enterprise thatdoes not seek solely to maximize its profit. We find that despite a reduced focus on profit, a publicenterprise may have stronger incentives to pursue anticompetitive activities than does a private,profit-maximizing firm. These activities include setting prices below marginal cost, raising theoperating costs of existing rivals, erecting entry barriers to preclude the operation of new competitors,and circumventing regulations designed to foster competition.

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Authors and Affiliations

  1. Department of Economics, University of Florida, 204 Matherly Hall, P.O. Box 117140, Gainesville, FL, 32611-7140, U.S.A.

    David E. M. Sappington

  2. American Enterprise Institute for Public Policy Research, 1150 17th Street, N.W., Washington, D.C, 20036, U.S.A.

    J. Gregory Sidak

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  1. David E. M. Sappington
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  2. J. Gregory Sidak
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Sappington, D.E.M., Sidak, J.G. Incentives for Anticompetitive Behavior by Public Enterprises. Review of Industrial Organization 22, 183–206 (2003). https://doi.org/10.1023/A:1023607223501

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