ABSTRACT
The main potential contributions of a public enterprise to welfare then concern sector specific efficiency and sector specific income distribution. In order to best deal with the normative public enterprise literature we first treat economic efficiency as the single goal and then introduce distributional concerns either through constraints or through welfare weights. Competition among public enterprises in the same markets is quite rare. Public-private competition has become increasingly common for differentiated products, in particular in the form of intermodal competition. This philosophy simply extends to the unweighted social surplus maximizing public enterprise. Just like in a monopoly situation it will set output such that price equals marginal cost. Larger sales in a natural monopoly situation will allow the public enterprise to come closer to exhausting economies of scale. In a natural oligopoly setting government could leave the market to private firms and could apply regulatory or antitrust policy to reach welfare optimal performance.
