Public Firm in Mixed Oligopolistic Structure: A Theoretical Exposition

The logic for state monopoly of public utilities arises from increasing returns to scale and the concern that private business in these areas results in monopolistic exploitation of consumers. The state monopoly however is fraught with the danger of production inefficiency. In this backdrop, the market form of mixed oligopoly is contemplated in markets like health, education, electricity, gas, telecommunications etc, where public and private sector coexists. The private firms maximize profit but the public firm maximizes social welfare. Despite this theoretical exposition, it is often observed that public firms fail to make contributions according to their potentiality. The public firm in an industry with rapid change in technology can perform inefficiently due to decision making delay, adherence to social obligation. The policy makers must rise to these occasions then survival of public firms will be smooth. The option of public private partnership also derives affirmative results for the society and the particular industry per se.