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Regulation of Public Utilities under Asymmetric Information

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  • Serge Garcia

    ()

  • Alban Thomas

    ()

Abstract

We consider the relationship between a localcommunity and a private operator in charge ofthe water utility. An important feature of themodel is the possibility of water networklosses that are costly to the operator. Wecompute the first-best and asymmetricinformation solutions to the optimal contract,with private information on the operator'stechnology. Based on an econometric estimationof production cost and water demand for a panelof French local communities, we simulate theoptimal contract solutions and show thatasymmetric information has importantconsequences for the regulation of water publicutilities. Copyright Kluwer Academic Publishers 2003

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File URL: http://hdl.handle.net/10.1023/A:1025629503671
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Bibliographic Info

Article provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

Volume (Year): 26 (2003)
Issue (Month): 1 (September)
Pages: 145-162

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Handle: RePEc:kap:enreec:v:26:y:2003:i:1:p:145-162

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Web page: http://www.springerlink.com/link.asp?id=100263

Related research

Keywords: contract; environment; information; regulation; water;

References

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  1. Jean Tirole & Jean-Jaques Laffont, 1985. "Using Cost Observation to Regulate Firms," Working papers 368, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Crain, W Mark & Zardkoohi, Asghar, 1978. "A Test of the Property-Rights Theory of the Firm: Water Utilities in the United States," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 395-408, October.
  3. Thomas Alban, 1995. "Regulating Pollution under Asymmetric Information: The Case of Industrial Wastewater Treatment," Journal of Environmental Economics and Management, Elsevier, vol. 28(3), pages 357-373, May.
  4. Céline Nauges & Arnaud Reynaud, 2001. "Estimation de la demande domestique d'eau potable en France," Revue économique, Presses de Sciences-Po, vol. 52(1), pages 167-185.
  5. Serge Garcia & Alban Thomas, 2001. "The Structure of Municipal Water Supply Costs: Application to a Panel of French Local Communities," Journal of Productivity Analysis, Springer, vol. 16(1), pages 5-29, July.
  6. McFadden, Daniel & Ruud, Paul A, 1994. "Estimation by Simulation," The Review of Economics and Statistics, MIT Press, vol. 76(4), pages 591-608, November.
  7. Renzetti, Steven, 1992. "Evaluating the welfare effects of reforming municipal water prices," Journal of Environmental Economics and Management, Elsevier, vol. 22(2), pages 147-163, March.
  8. Steven Renzetti, 1992. "Estimating the Structure of Industrial Water Demands: The Case of Canadian Manufacturing," Land Economics, University of Wisconsin Press, vol. 68(4), pages 396-404.
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Citations

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Cited by:
  1. Eshien Chong & Freddy Huet, 2010. "Partenariats public-privé et investissements de fin de contrat : le cas de l'industrie de l'eau en France," Recherches économiques de Louvain, De Boeck Université, vol. 76(4), pages 413-448.
  2. Angel Prieto & José L. Zofio & Inmaculada Alvarez, 2009. "Economías de escala, densidad y alcance en la provisión pública de infraestructura básica municipal," Hacienda Pública Española, IEF, vol. 190(3), pages 59-94, September.
  3. Garcia, Serge & Reynaud, Arnaud, 2004. "Estimating the benefits of efficient water pricing in France," Resource and Energy Economics, Elsevier, vol. 26(1), pages 1-25, March.
  4. Peter Haug, 2007. "Local Government Control and Efficiency of the Water Industry: An Empirical Analysis of Water Suppliers in East Germany," IWH Discussion Papers 3, Halle Institute for Economic Research.
  5. Henrique Monteiro, 2010. "Residential Water Demand in Portugal: checking for efficiency-based justifications for increasing block tariffs," Working Papers Series 1 ercwp0110, ISCTE-IUL, Business Research Unit (BRU-IUL).

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