A sample of observations on comparative prices in public and private enterprises

Abstract

Assuming imperfect competition and economy-wide welfare maximization, public enterprises should have lower profit margins and thus with comparable costs should have lower prices than private companies carrying on the same activity. Data from a sample of comparable Indonesian public and private enterprises show lower public enterprise profit margins, but they also show higher costs, so that public enterprise prices were not lower than private enterprise prices. An attempt is made to explain and generalize on these results.