Public Interest Firms as Leaders in Oligopolistic Industries

Abstract

In the German institutional economic literature firms with the attribute ‘gemeinwirtschaftlich’ have played a major role over the past hundred years. The term ‘gemeinwirtschaftlich’ has no obvious English translation and no unique meaning in German (for a discussion in English see Landauer, 1976). Today there is some agreement among authors that in order to earn this attribute firms have to pursue a public interest besides benefiting their shareholders. In this chapter they are called public interest firms (PIFs). Public enterprises, humanitarian institutions like the Red Cross, non-profit hospitals or homes for the aged are quite unanimously considered as PIFs in the literature. The most discussed borderline case concerns consumer and producer cooperatives. Their status as PIFs is doubtful because they are meant to serve their members’ interest. The group most noisy about their status as PIFs are also a borderline case. They are the enterprises belonging to the German trade unions. Among others, trade unions control the largest German housing firm Neue Heimat (NH), the second largest life insurance company Volksfürsorge (VF), the sizeable Bank für Gemeinwirtschaft (BfG) and the largest consumer cooperative Coop Zentrale AG (Coop).