In literature, we can find several debates regarding whether SOEs (State Owned Enterprises) should exist or not. Nowadays this debate has extended on an assessment of SOE international operations, in which a majority of scholars and regulators deem this as negative.
In a recent study regarding the potential welfare effects of SOEs’ international operations, named “Welfare Effects of State-owned Multinational Enterprises: A view from agency and incomplete contracts theory” by Right Asmund, the author argues that when the assumptions needed for the First Welfare Theorem are not fulfilled, including the absence of public goods, externalities and natural monopolies, there could exist a rationale for government intervention. But, for state ownership to actually be preferable, three conditions must be met: 1) The private firm is risk averse, 2) the private firm is financially constrained and 3) complete contingent contracts cannot be written and full commitment is not possible.
Having said this, I think that for a real-life evaluation of this, the careful analysis of incentive structures must be done as the three conditions named above are unquestionably linked to the compatibility of incentives. I have found very interesting what we have seen about Chapter 1 so far. However, I also deem interesting to approach the General Equilibrium framework by talking more about incentive compatibility, as the SOEs imply.
Below you can find all the information in case you are interested in reading more about it:
Asmund Rygh, “Welfare effects of state-owned multinational enterprises: a view from agency and incomplete contracts theory”, International Journal of Public Sector Management, https://doi.org/10.1108/IJPSM-03-2017-0110