State-Owned Enterprise, Mixed Oligopoly and Entry

Abstract

We analyse state-owned enterprise (SOE) behaviour under pure and mixed oligopoly. An industry comprising at least two SOEs is shown not to have a symmetric stable equilibrium. This suggests the need for planning in such industries. For mixed oligopoly, we assume that an SOE has a cost disadvantage. When fixed costs must be sunk before entry, free entry implies that, if the SOE cost disadvantage is not too large, the presence of an SOE is immaterial for welfare (there is no welfare gain from privatisation). Similarly, a free-entry all-private oligopoly is welfare-superior to a public monopoly only if endowed with a significant cost advantage.state-owned enterprise, mixed oligopoly, privatisation