Performance of mixed oligopoly model in the context of Indian telecom industry

Chatterjee, Susmita and Datta, Debabrata and Banerjee, Ranjan (2016): Performance of mixed oligopoly model in the context of Indian telecom industry.

Abstract

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. As a result the issue of social welfare gets a short shrift. While assessing the behaviour and performance of the firm in this setup we must know the objective functions and the constraints. The asymmetry of objectives between private and public firms and the asymmetry of constraints may explain the below par performance of public firms. This needs focus on the existing theoretical construct on mixed oligopoly and empirical consideration of the performance of some specific public firm. In this paper we study the state owned Indian telecom company Bharat Shanchar Nigam Limited (BSNL) to get an understanding of performance of mixed oligopoly.

• Item Type: MPRA Paper
• Language: English
• Keywords: Mixed oligopoly, public sector firm, welfare
• Subjects: D - Microeconomics > D6 - Welfare Economics > D63 - Equity, Justice, Inequality, and Other Normative Criteria and Measurement; H - Public Economics > H8 - Miscellaneous Issues > H83 - Public Administration ; Public Sector Accounting and Audits

References

Basu,K (1993) :Lectures in Industrial Organisation Theory.Blackwell .

Sen,A (1990): “Privatisation and social welfare” Discussion Paper 32,IGIDR, Bombay.

De Fraja, Gianni and Flavio Delbono (1989), “Alternative strategies of a public enterprise in oligopoly.” Oxford Economic Papers, 41, 302—11.

Delbono, F., Denicolò, V., Scarpa, C. (1996): “Quality choice in a vertically differentiated mixed duopoly”, Economic Notes, 25, 33-46.

Grilo, I. (1994): “Mixed duopoly under vertical differentiation”, Annales d’economie et de statistique, 33, 92-112.

Lutz, S. and Pezzino, M. (2009): “International strategic choice of minimum quality standards and welfare”, ICER, Turin, working paper 02/2009.

Motta, M. (1994): “International trade and investments in a vertically differentiated industry”, International Journal of Industrial Organization, 12,179-196.

Mussa, M. and Rosen, S. (1978): “Monopoly and Product Quality”, Journal of Economic Theory, 18, 301-317.

Sutton, J. (1991): “Sunk costs and market structure”, MIT press.

Teresa,C, Zsuzsanna, L and Isabelle, J(2007): “ Improving Public Sector Efficiency: Challenges and Opportunities” OECD Journal on Budgeting Volume 7 – No. 1 © OECD 2007