IDEAS home Printed from https://ideas.repec.org/p/esx/essedp/8899.html
   My bibliography  Save this paper

Integrated versus Separated Regulation: An Application to the Water Industry

Author

Listed:
  • Barolini, David

Abstract

The regulation of monopolistic firms has been widely investigated in the economic literature. Particular emphasis has been placed on the relationship between the regulated monopolist and the regulator. The present work deals with problems that may arise from the presence of several regulators. If regulators have different objective functions, inefficiency is likely to arise. A theoretical model with two regulators, one monopolistic firm and a renewable natural resource is presented. In this set up the level of demand relative to the sustainable use of the water resource plays a major role. The main result is the characterization of the cases in which the outcome of the regulation actually differs between the integrated-regulator and the separate-regulator scenarios. We find that the main determinants of the equilibrium are the level of demand and the marginal environmental damage. The equilibria obtained are analyzed in terms of price, environmental tax levels, and in terms of welfare distribution among the components of the regulator(s)' objective function.

Suggested Citation

  • Barolini, David, 2006. "Integrated versus Separated Regulation: An Application to the Water Industry," Economics Discussion Papers 8899, University of Essex, Department of Economics.
    • Handle: RePEc:esx:essedp:8899
    as

    Download full text from publisher

    File URL: https://repository.essex.ac.uk/8899/
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Herbert Dawid & Christophe Deissenberg & Pavel Ševčik, 2005. "Cheap Talk, Gullibility, and Welfare in an Environmental Taxation Game," Springer Books, in: Alain Haurie & Georges Zaccour (ed.), Dynamic Games: Theory and Applications, chapter 0, pages 175-192, Springer.
    2. Jean-Jacques Laffont & David Martimort, 1999. "Separation of Regulators Against Collusive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 30(2), pages 232-262, Summer.
    3. 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.
    4. Martimort, David, 1999. "Renegotiation Design with Multiple Regulators," Journal of Economic Theory, Elsevier, vol. 88(2), pages 261-293, October.
    5. David P. Baron, 1985. "Noncooperative Regulation of a Nonlocalized Externality," RAND Journal of Economics, The RAND Corporation, vol. 16(4), pages 553-568, Winter.
    6. Loeb, Martin & Magat, Wesley A, 1979. "A Decentralized Method for Utility Regulation," Journal of Law and Economics, University of Chicago Press, vol. 22(2), pages 399-404, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Armstrong, Mark & Sappington, David E.M., 2007. "Recent Developments in the Theory of Regulation," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 27, pages 1557-1700, Elsevier.
    2. David Bartolini, 2010. "Separation of Regulatory Powers When Contracts Are Incomplete," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 12(2), pages 225-247, April.
    3. Antonio Estache & Liam Wren-Lewis, 2009. "Toward a Theory of Regulation for Developing Countries: Following Jean-Jacques Laffont's Lead," Journal of Economic Literature, American Economic Association, vol. 47(3), pages 729-770, September.
    4. Mark Armstrong & David E.M. Sappington, 2006. "Regulation, Competition and Liberalization," Journal of Economic Literature, American Economic Association, vol. 44(2), pages 325-366, June.
    5. van Egteren, Henry, 1996. "Regulating an externality-generating public utility: A multi-dimensional screening approach," European Economic Review, Elsevier, vol. 40(9), pages 1773-1797, December.
    6. Bickenbach, Frank, 2000. "Regulation of Europe's network industries: the perspective of the new economic theory of federalism," Kiel Working Papers 977, Kiel Institute for the World Economy (IfW Kiel).
    7. Haselmann, Rainer & Singla, Shikhar & Vig, Vikrant, 2022. "Supranational supervision," LawFin Working Paper Series 50, Goethe University, Center for Advanced Studies on the Foundations of Law and Finance (LawFin).
    8. Laffont, Jean-Jacques & Pouyet, Jerome, 2004. "The subsidiarity bias in regulation," Journal of Public Economics, Elsevier, vol. 88(1-2), pages 255-283, January.
    9. Marcel Boyer & Jean-Jacques Laffont, 1996. "Toward a Political Theory of Environmental Policy," CIRANO Working Papers 96s-07, CIRANO.
    10. Adwoa Asantewaa & Tooraj Jamasb & Manuel Llorca, 2022. "Electricity Sector Reform Performance in Sub-Saharan Africa: A Parametric Distance Function Approach," Energies, MDPI, vol. 15(6), pages 1-29, March.
    11. Emmanuelle Auriol & Antonio Estache & Liam Wren-Lewis, 2018. "Can Supranational Infrastructure Regulation Compensate for National Institutional Weaknesses?," Revue économique, Presses de Sciences-Po, vol. 69(6), pages 913-936.
    12. Patricia Charléty & Said Souam, 2002. "Analyse économique des fusions horizontales," Revue Française d'Économie, Programme National Persée, vol. 17(2), pages 37-68.
    13. Egerer, Jonas & Rosellón, Juan & Schill, Wolf-Peter, 2015. "Power System Transformation toward Renewables: An Evaluation of Regulatory Approaches for Network Expansion," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 36(4), pages 105-128.
    14. Dagobert Brito & Juan Rosellón, 2011. "Lumpy Investment in Regulated Natural Gas Pipelines: An Application of the Theory of the Second Best," Networks and Spatial Economics, Springer, vol. 11(3), pages 533-553, September.
    15. Avignone, Giuseppe & Altunbas, Yener & Polizzi, Salvatore & Reghezza, Alessio, 2021. "Centralised or decentralised banking supervision? Evidence from European banks," Journal of International Money and Finance, Elsevier, vol. 110(C).
    16. Haselmann, Rainer & Singla, Shikhar & Vig, Vikrant, 2022. "Supranational supervision," LawFin Working Paper Series 46, Goethe University, Center for Advanced Studies on the Foundations of Law and Finance (LawFin).
    17. Melinda Acutt & Caroline Elliott, 1999. "Regulatory Conflict? Environmental and Economic Regulation of Electricity Generation," Working Papers 1999.40, Fondazione Eni Enrico Mattei.
    18. Anne Neumann & Juan Rosellón & Hannes Weigt, 2015. "Removing Cross-Border Capacity Bottlenecks in the European Natural Gas Market—A Proposed Merchant-Regulatory Mechanism," Networks and Spatial Economics, Springer, vol. 15(1), pages 149-181, March.
    19. Ajodhia, Virendra & Hakvoort, Rudi, 2005. "Economic regulation of quality in electricity distribution networks," Utilities Policy, Elsevier, vol. 13(3), pages 211-221, September.
    20. Kartasheva, Anastasia V., 2012. "Design of investment promotion policies," International Journal of Industrial Organization, Elsevier, vol. 30(2), pages 127-136.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:esx:essedp:8899. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Essex Economics Web Manager (email available below). General contact details of provider: https://edirc.repec.org/data/edessuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.