“Government-owned monopolies are less X-efficient than private monopolies and have less ofan incentive to initiate and...

“Government-owned monopolies are less X-efficient than private monopolies and have less ofan incentive to initiate and implement cost-saving innovations than their profit –driven privatecounterparts.” (Calitz. E, Siebrits, K. and T. Steenkamp: 2019. Public Economics, 7thedition:70)Discus this statement by referring to the current situation at Eskom

2. Subject: Governmental economics 20A

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Expert Solution

It is true that government-owned monopolies are less efficient than private monopolies. For example, railways run by the governments across countries have been found to be less efficient than those run by private companies.

There are various reasons behind it. However one of the main reason is that a private monopoly fears restrictions and other regulatory actions such as takeover by the government if the company is found to be in sad state of affairs as most government owned monoplies are. The other reasons are importance of work culture, management's accountability etc.

A government owned monopoly has no incentive to be a profit-driven company as the government servants get a fixed allowance irrespective of their performance which is not the case with a private monopoly.

Therefore, we can see that the above mentioned causes are the reasons why a private monopoly is more efficient than a government monopoly.

Rahul Sunny answered 2 months ago

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