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Competitive Bidding for a Long-Term Electricity Distribution Contract

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Author Info
Stephen C Littlechild () (University of Cambridge)
Abstract

Demsetz (1968) and Posner (1972) suggested competitive bidding as an alternative to natural monopoly regulation. Williamson (1976) and Goldberg (1976) argued that the problems of natural monopoly regulation are inherent in long-term investment under uncertainty. Long- and short-term franchising contracts may be more problematic than regulation. This paper reviews the literature and UK experience. It examines London Underground's recent long-term (thirty-year) contract for its electricity distribution network. This has avoided the Oakland CATV problems described by Williamson, but involves considerable resources to monitor. Competitive contracting seems feasible and advantageous versus public provision. Its merits versus utility regulation warrant further consideration.

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Publisher Info
Article provided by Concept Economics in its journal Review of Network Economics.

Volume (Year): 1 (2002)
Issue (Month): 1 (March)
Pages: 1-38
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:rne:rneart:v:1:y:2002:i:1:p:1-38

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Related research
Keywords: Franchise bidding; contracting out; natural monopoly; electricity; regulation; Public Finance Initiative.;

Find related papers by JEL classification:
D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Demsetz, Harold, 1971. "On the Regulation of Industry: A Reply," Journal of Political Economy, University of Chicago Press, vol. 79(2), pages 356-63, March-Apr. [Downloadable!] (restricted)
  2. Zupan, Mark A, 1989. "The Efficacy of Franchise Bidding Schemes in the Case of Cable Television: Some Systematic Evidence," Journal of Law & Economics, University of Chicago Press, vol. 32(2), pages 401-56, October.
  3. Peacock, Alan T. & Rowley, Charles K., 1972. "Welfare economics and the public regulation of natural monopoly," Journal of Public Economics, Elsevier, vol. 1(2), pages 227-244, August. [Downloadable!] (restricted)
  4. Richard A. Posner, 1972. "The Appropriate Scope of Regulation in the Cable Television Industry," Bell Journal of Economics, The RAND Corporation, vol. 3(1), pages 98-129, Spring. [Downloadable!] (restricted)
  5. John Vickers & George Yarrow, 1988. "Privatization: An Economic Analysis," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262720116, December.
  6. Telser, Lester G, 1969. "On the Regulation of Industry: A Note," Journal of Political Economy, University of Chicago Press, vol. 77(6), pages 937-52, Nov./Dec.. [Downloadable!] (restricted)
  7. George J. Stigler, 1974. "Free Riders and Collective Action: An Appendix to Theories of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 5(2), pages 359-365, Autumn. [Downloadable!] (restricted)
  8. Mark A. Zupan, 1989. "Cable Franchise Renewals: Do Incumbent Firms Behave Opportunistically?," RAND Journal of Economics, The RAND Corporation, vol. 20(4), pages 473-482, Winter. [Downloadable!] (restricted)
  9. Telser, Lester G, 1971. "On the Regulation of Industry: Rejoinder," Journal of Political Economy, University of Chicago Press, vol. 79(2), pages 364-65, March-Apr. [Downloadable!] (restricted)
  10. Grout, Paul A, 1997. "The Economics of the Private Finance Initiative," Oxford Review of Economic Policy, Oxford University Press, vol. 13(4), pages 53-66, Winter.
  11. Paul Joskow, 1984. "Vertical Integration and Long Term Contracts: The Case of Coal Burning Electric Generating Plants," Working papers 361, Massachusetts Institute of Technology (MIT), Department of Economics.
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  12. Brealey, R A & Cooper, I A & Habib, M A, 1997. "Investment Appraisal in the Public Sector," Oxford Review of Economic Policy, Oxford University Press, vol. 13(4), pages 12-28, Winter.
  13. Mark Armstrong & Simon Cowan & John Vickers, 1994. "Regulatory Reform: Economic Analysis and British Experience," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262510790, December.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Eshien Chong & Freddy Huet & Stéphane Saussier & Faye Steiner, 2006. "Public-Private Partnerships and Prices: Evidence from Water Distribution in France," Review of Industrial Organization, Springer, vol. 29(1), pages 149-169, September. [Downloadable!] (restricted)
  2. Henry Ergas & Teresa Fels & Jason Soon, 2004. "Exclusive Licensing in Harbour Towage," Review of Network Economics, Concept Economics, vol. 3(2), pages 145-167, June. [Downloadable!]
  3. Jon Stern, 2003. "Regulation and Contracts for Utility Services: Substitutes or Complements? Lessons from UK Railway and Electricity History," Journal of Policy Reform, Taylor and Francis Journals, vol. 6(4), pages 193-215, January. [Downloadable!] (restricted)
  4. Emiel Maasland & Sander Onderstal, 2006. "Going, Going, Gone! A Swift Tour of Auction Theory and its Applications," De Economist, Springer, vol. 154(2), pages 197-249, June. [Downloadable!] (restricted)
    Other versions:
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