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

Nonfiction 4

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

Government-owned and government-subsidized agencies compete with deepest companies in quite a few actions yet are usually endowed with privileges and immunities no longer loved through their deepest competitors. Competing with the govt. unearths how those privileges provide executive organizations a synthetic aggressive virtue that fosters quite a lot of very likely damaging results. interpreting numerous cases within which executive and personal companies compete—including freight carriage, electrical utilities, monetary providers, and others—the authors elevate basic questions on the correct courting among enterprise and executive in a industry economic climate and underline the necessity for major coverage switch relating to festival among govt and personal organisations. Drawing from a wealth of case stories, they aspect how state-owned organizations (SOEs) take pleasure in an array of government-granted privileges and immunities that may be used anticompetitively, revealing why an SOE is likely to interact in anticompetitive habit than a privately owned firm—and why anticompetitive habit by means of SOEs is perhaps destructive to society. They exhibit how the U.S. Postal Service—as good as postal prone abroad—have continually been in charge of anticompetitive habit. they usually make a powerful case that government-sponsored organizations akin to Fannie Mae and Freddie Mac have really violated the Sherman antitrust act through 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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In 1989, Jerome Ellig observed, ‘‘Clearly, if a government weather bureau providing commercial services charges its clients less than the incremental costs of those services, private firms will find it extremely difficult to compete, even if they receive all of the government’s weather data for free. In this case, private firms are obviously competing against a taxpayer-subsidized bureaucracy. Some firms that could provide forecasts less expensively, or more accurately, get pushed out of the market.

The mechanism used by a government firm to cross subsidize activities in which it faces private competition can be more complex than direct cross subsidy. There are various institutional arrange- .......................... 10609$ $CH2 02-19-04 11:13:28 PS 36 R. Richard Geddes ments that allow a government-subsidized firm to transfer subsidies to another, affiliated firm. For example, the government-subsidized firm may form a joint venture with another, previously unsubsidized firm. It can then transfer subsidies to its venture partner, allowing the partner to inefficiently compete with unsubsidized rivals.

20. See Steven Salop and David Scheffman, ‘‘Raising Rivals’ Costs,’’ American Economic Review 73 (1983): 267–71; Steven Salop and David Scheffman, ‘‘Cost-Raising Strategies,’’ Journal of Industrial Economics 36 (1987): 19–34. 21. Notice that when cost complementarities are present, rivals’ costs can be increased simply by the fact that they are precluded from operating in markets that are reserved exclusively for an SOE. As we explain in greater detail, the mere presence of a monopolized market can prevent rivals from reducing their costs to the level enjoyed by an SOE, even in the absence of any deliberate attempt by the SOE to raise its rivals’ costs.

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