Competing With the Government: Anticompetitive Behavior and by R. Richard Geddes, R. Richard Geddes, David E. M.

By R. Richard Geddes, R. Richard Geddes, David E. M. Sappington, J. Gregory Sidak, Peter J. Wallison

Government-owned and government-subsidized businesses compete with deepest organizations in quite a few actions yet are frequently endowed with privileges and immunities no longer loved through their inner most opponents. Competing with the govt unearths how those privileges provide executive businesses a man-made aggressive virtue that fosters a variety of very likely destructive results. interpreting quite a few circumstances during which executive and personal businesses compete—including freight carriage, electrical utilities, monetary companies, and others—the authors bring up primary questions on the correct dating among enterprise and govt in a marketplace economic system and underline the necessity for major coverage swap concerning festival among govt and personal corporations. Drawing from a wealth of case experiences, they aspect how state-owned organisations (SOEs) get pleasure from an array of government-granted privileges and immunities that may be used anticompetitively, revealing why an SOE is prone to have interaction in anticompetitive habit than a privately owned firm—and why anticompetitive habit via SOEs could be damaging to society. They exhibit how the U.S. Postal Service—as good as postal companies abroad—have constantly been responsible of anticompetitive habit. they usually make a powerful case that government-sponsored agencies reminiscent of Fannie Mae and Freddie Mac have really violated the Sherman antitrust act by means of monopolizing the automatic underwriting marketplace.

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Extra info for Competing With the Government: Anticompetitive Behavior and Public Enterprises (Hoover Institution Press Publication)

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Third, more efficient but unsubsidized private firms will contract, not invest, or may not start up if they observe or anticipate competition from a government rival. If there is uncertainty over the government firm’s intention or ability to expand into a particular activity, that uncertainty will contribute to private disinvestment. Fourth, if a government firm prices below cost, then less (or none) of its overhead costs will be covered by the price of the service, which means that taxpayers (or some other captive group) must pay for more of the cost of the overhead.

SOE managers’ wealth will not be reduced by predation. Instead, the manager is likely to value the increased output associated with predation for its own sake and can indulge that preference with impunity. If the firm is not profit maximizing, there is no need to subsequently raise prices to recoup losses from predation. In addition to directly lowering the cost of equity, captive equity removes any market-based constraint on below-cost pricing. Exemption from Bankruptcy The companion privilege to captive equity is exemption from bankruptcy.

10609$ $CH2 02-19-04 11:13:28 PS 34 R. Richard Geddes Direct Subsidies Some SOEs receive direct government subsidies to defray capital and operating costs. Amtrak, for example, has never made money in its entire 32-year history. As of 2002, it had received over $44 billion (in 2002 dollars) in direct federal subsidies since it began operations in 1971. Until 1983, the Postal Service received a general public service subsidy. Perhaps because they are such transparent assistance (and a drain on the Treasury), direct subsidies are somewhat rare compared to other government-granted privileges.

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