Mixed oligopoly, public firm behavior, and free private entry

We analyze a mixed oligopoly with free entry by private …rms, assum-
ing that a public …rm maximizes an increasing function of output, subject
to a break-even constraint. We establish an irrelevance result: whenever a
mixed oligopoly is viable, then aggregate output, aggregate costs and wel-
fare are the same with and without the public …rm. However, replacing a
viable mixed oligopoly with a public monopoly yields higher net welfare.
Implications for privatization policy are suggested.