Enhancing Efficiency of Water Supply - Product Market Compoetition versus Trade
AbstractThis paper analyses welfare gains in the piped water industry when introducing competition or trade between local utilities. The connection of neighbouring networks can be used for both, voluntary cross border trade and product market competition by common carriage. Using a game theoretic model we show that common carriage induces stronger production incentives for inefficient suppliers. This implies that production efficiency but also retail price tend to be lower than with trade. The net effect regarding welfare depends on the efficiency differential. At higher cost differentials welfare is higher under competition ? even in a lower bound benchmark case without regulation.
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Bibliographic InfoPaper provided by University of Zurich, Institute for Strategy and Business Economics (ISU) in its series Working Papers with number 0025.
Length: 32 pages
Date of creation: 2004
Date of revision:
Water; Networks; Product-Market Competition; Trade; Bargaining;
Other versions of this item:
- Reto Foellmi & Urs Meister, 2004. "Enhancing Efficiency of Water Supply – Product Market Competition versus Trade," Public Economics 0412012, EconWPA.
- L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities
- L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
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- Reto Foellmi & Urs Meister, 2004.
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