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The impact of productive efficiency and quality of a regulated local public utility on final goods prices and consumers welfare

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Abstract

In this paper, we reconstruct the process by which the decisions of a regulated local public utility, in terms of productive efficiency and quality of the service provided, impact on prices of final consumption goods, supplied in a oligopolistic market operating in the same geographic area. We obtain some formula for these effects which can be quantified by estimating firms’ conditional input demand function of the public service and firms’ inverse demand function for this public good, non-rival, component. Finally, we draw the effects of productive efficiency and quality on consumer welfare and cost-of-living, via changes on tariffs, external effects and final goods prices.

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Paper provided by Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa in its series Working Papers - Economics with number wp2008_10.rdf.

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Length: 33 pag
Date of creation: 2008
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Handle: RePEc:frz:wpaper:wp2008_10.rdf

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Keywords: regulation; x-efficiency; oligopoly; consumer welfare;

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  1. Bartle, Ian & Vass, Peter, 2007. "Independent economic regulation: A reassessment of its role in sustainable development," Utilities Policy, Elsevier, vol. 15(4), pages 261-269, December.
  2. Picazo-Tadeo, Andres J. & Saez-Fernandez, Francisco J. & Gonzalez-Gomez, Francisco, 2008. "Does service quality matter in measuring the performance of water utilities," Utilities Policy, Elsevier, vol. 16(1), pages 30-38, March.
  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, January.
  4. Raffaele Miniaci & Carlo Scarpa & Paola Valbonesi, 2007. "Distributional effects of price reforms in the Italian utility markets," "Marco Fanno" Working Papers 0050, Dipartimento di Scienze Economiche "Marco Fanno".
  5. 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.
  6. Bennett, John & Elisabetta Iossa, 2002. "Building and Managing Facilities for Public Services," Royal Economic Society Annual Conference 2002 22, Royal Economic Society.
  7. Owen, Gill, 2006. "Sustainable development duties: New roles for UK economic regulators," Utilities Policy, Elsevier, vol. 14(3), pages 208-217, September.
  8. BEHRENS, Kristian & THISSE, Jacques-François, . "Regional economics: a new economic geography perspective," CORE Discussion Papers RP -1946, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  9. Creedy, J., 1997. "Measuring Welfare Changes and the Excess Burden of Taxation," Department of Economics - Working Papers Series 587, The University of Melbourne.
  10. Paul Makdissi & Quentin Wodon, 2007. "Poverty-Reducing and Welfare-Improving Marginal Public Price and Price Cap Reforms," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 9(4), pages 683-698, 08.
  11. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, January.
  12. Graeme Guthrie, 2006. "Regulating Infrastructure: The Impact on Risk and Investment," Journal of Economic Literature, American Economic Association, vol. 44(4), pages 925-972, December.
  13. Fare, Rolf, et al, 1989. "Multilateral Productivity Comparisons When Some Outputs Are Undesirable: A Nonparametric Approach," The Review of Economics and Statistics, MIT Press, vol. 71(1), pages 90-98, February.
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