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The Measurement of Vertical Economies and the Efficient Structure of the Electric Utility Industry

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Author Info
Kaserman, David L
Mayo, John W

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Abstract

In this article, the concept of multiproduct cost economies is modified to the case of production at vertically related stages to derive an explicit and general measure of economies of vertical integration. The utility of this measure is then demonstrated by estimating the vertical cost structure of the electric utility industry and by carrying out the calculations necessary to determine the magnitude of vertical economies in this industry. The results provide empirical evidence of the existence of significant economies of vertical integration between the generation and transmission/distribution stages of electricity supply. Copyright 1991 by Blackwell Publishing Ltd.

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Publisher Info
Article provided by Blackwell Publishing in its journal Journal of Industrial Economics.

Volume (Year): 39 (1991)
Issue (Month): 5 (September)
Pages: 483-502
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Handle: RePEc:bla:jindec:v:39:y:1991:i:5:p:483-502

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  1. Goto, Mika & Makhija, Anil K., 2007. "The Impact of Competition and Corporate Structure on Productive Efficiency: The Case of the U.S. Electric Utility Industry, 1990-2004," Working Paper Series 2007-10, Ohio State University, Charles A. Dice Center for Research in Financial Economics. [Downloadable!]
  2. Kwoka, J. & Ozturk, S. & Pollitt, M.G., 2008. "Divestiture Policy and Operating Efficiency in U.S. Electric Power Distribution," Cambridge Working Papers in Economics 0835, Faculty of Economics, University of Cambridge. [Downloadable!]
  3. Brennan, Timothy, 2005. "Alleged Transmission Undersupply: Is Restructuring the Cure or the Cause?," Discussion Papers dp-05-50, Resources For the Future. [Downloadable!]
  4. Alexander Galetovic, 2003. "Integración Vertical en el Sector Eléctrico: Una guía para el usuario (Vertical integration in the electricity sector)," Documentos de Trabajo 158, Centro de Economía Aplicada, Universidad de Chile. [Downloadable!]
  5. John Kwoka, 2006. "The Role of Competition in Natural Monopoly: Costs, Public Ownership, and Regulation," Review of Industrial Organization, Springer, vol. 29(1), pages 127-147, September. [Downloadable!] (restricted)
  6. Changqi Wu & Leonard K. Cheng, 1997. "Hong Kong's Business Regulation in Transition," NBER Working Papers 6332, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  7. Russell Pittman, 2001. "Vertical Restructuring of the Infrastructure Sectors of Transition Economies," Industrial Organization 0111002, EconWPA. [Downloadable!]
  8. Ronald Fischer & Pablo Serra, 2000. "Regulating the Electricaly Sector in Latin America," Documentos de Trabajo 86, Centro de Economía Aplicada, Universidad de Chile. [Downloadable!]
  9. Arnaud Reynaud & Serge Garcia & Michel Moreaux, 2004. "Measuring Economies of Vertical Integration in Network," Econometric Society 2004 North American Summer Meetings 184, Econometric Society. [Downloadable!]
  10. Jamasb, Tooraj & Mota, Raffaella & Newbery, David & Pollitt, Michael, 2005. "Electricity sector reform in developing countries : a survey of empirical evidence on determinants and performance," Policy Research Working Paper Series 3549, The World Bank. [Downloadable!]
    Other versions:
  11. Jamasb, T. & Pollitt, M., 2005. "Deregulation and R&D in Network Industries: The Case of the Electricity Industry," Cambridge Working Papers in Economics 0533, Faculty of Economics, University of Cambridge. [Downloadable!]
  12. Delmas, Magali & Tokat, Yesim, 2003. "Deregulation Process, Governance Structures and Efficiency: The U.S. Electric Utility Sector," Research Papers 1790, Stanford University, Graduate School of Business. [Downloadable!]
  13. Takuya Urakami, 2006. "Economies of Vertical Integration in the Japanese Water Supply Industry," ERSA conference papers ersa06p200, European Regional Science Association. [Downloadable!]
  14. Richard Gilbert & Justine Hastings, 2001. "Vertical Integration in Gasoline Supply: An Empirical Test of Raising Rivals' Costs," Department of Economics, Working Paper Series 1011, Department of Economics, Institute for Business and Economic Research, UC Berkeley. [Downloadable!]
    Other versions:
  15. Marc Ivaldi & Gerard Mccullough, 2008. "Subadditivity Tests for Network Separation with an Application to U.S. Railroads," Review of Network Economics, Concept Economics, vol. 7(1), pages 159-171, March. [Downloadable!]
    Other versions:
  16. David Sappington, 2006. "On the Merits of Vertical Divestiture," Review of Industrial Organization, Springer, vol. 29(3), pages 171-191, November. [Downloadable!] (restricted)
  17. Dan Berry & Franklin Mixon, 1999. "Multiproduct Outputs and Scale Economies in Electric Power Production: Some New Estimates," Review of Industrial Organization, Springer, vol. 15(1), pages 65-76, August. [Downloadable!] (restricted)
  18. John E. Kwoka, 2005. "Electric power distribution: economies of scale, mergers, and restructuring," Applied Economics, Taylor and Francis Journals, vol. 37(20), pages 2373-2386, November. [Downloadable!] (restricted)
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