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Incentives for Anticompetitive Behavior by Public Enterprises

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.