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Vertical And Horizontal Economies In The Electric Utility Industry: An Integrated Approach


  • Massimiliano Piacenza
  • Davide Vannoni


The empirical literature on the cost structure of the electric utility industry traditionally focused on the measurement of specific technological properties: 1) scale economies in generation or distribution; 2) multi-product (or horizontal) scope economies at one particular stage; 3) multi-stage (or vertical) scope economies. By adopting an integrated approach, which simultaneously considers both horizontal and vertical aspects of the technology, we find the presence, on a sample of Italian electric utilities, of both vertical integration gains and horizontal scope economies at the downstream stage. In the light of recent regulatory reforms aiming at restructuring European electricity markets, our findings have important policy implications as for the proper configuration of the industry. Moreover, this methodology can be usefully applied to the study of the production structure of other public network utilities involved in similar vertical and horizontal reorganization processes. Copyright © 2009 The Authors Journal compilation © CIRIEC 2009.

Suggested Citation

  • Massimiliano Piacenza & Davide Vannoni, 2009. "Vertical And Horizontal Economies In The Electric Utility Industry: An Integrated Approach," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 80(3), pages 431-450, September.
  • Handle: RePEc:bla:annpce:v:80:y:2009:i:3:p:431-450

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    References listed on IDEAS

    1. Gathon, H. -J. & Pestieau, P., 1995. "Decomposing efficiency into its managerial and its regulatory components: The case of European railways," European Journal of Operational Research, Elsevier, vol. 80(3), pages 500-507, February.
    2. Bernadette Biatour & Mathieu Lefebvre & Sergio Pereleman & Pierre Pestieau, 2005. "Faut-il un ou plusieurs indicateurs d'exclusion sociale?," CREPP Working Papers 0503, Centre de Recherche en Economie Publique et de la Population (CREPP) (Research Center on Public and Population Economics) HEC-Management School, University of Liège.
    3. van Doorslaer, Eddy & Wagstaff, Adam & Bleichrodt, Han & Calonge, Samuel & Gerdtham, Ulf-G. & Gerfin, Michael & Geurts, Jose & Gross, Lorna & Hakkinen, Unto & Leu, Robert E., 1997. "Income-related inequalities in health: some international comparisons," Journal of Health Economics, Elsevier, vol. 16(1), pages 93-112, February.
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    Cited by:

    1. Piacenza, Massimiliano & Turati, Gilberto & Vannoni, Davide, 2010. "Restructuring hospital industry to control public health care expenditure: The role of input substitutability," Economic Modelling, Elsevier, vol. 27(4), pages 881-890, July.
    2. Gugler, Klaus & Liebensteiner, Mario & Schmitt, Stephan, 2017. "Vertical disintegration in the European electricity sector: Empirical evidence on lost synergies," International Journal of Industrial Organization, Elsevier, vol. 52(C), pages 450-478.
    3. Goto, Mika & Inoue, Tomohiro & Sueyoshi, Toshiyuki, 2013. "Structural reform of Japanese electric power industry: Separation between generation and transmission & distribution," Energy Policy, Elsevier, vol. 56(C), pages 186-200.
    4. Bottasso, Anna & Conti, Maurizio & Piacenz, Massimiliano & Vannoni, Davide, 2011. "The appropriateness of the poolability assumption for multiproduct technologies: Evidence from the English water and sewerage utilities," International Journal of Production Economics, Elsevier, vol. 130(1), pages 112-117, March.
    5. Nikogosian, Vigen & Veith, Tobias, 2011. "Vertical integration, separation and non-price discrimination: An empirical analysis of German electricity markets for residential customers," ZEW Discussion Papers 11-069, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    6. Ferro, Gustavo & Lentini, Emilio & Mercadier, Augusto & Romero, Carlos A., 2010. "Retornos a escala en agua y saneamiento: estimaciones para América Latina
      [Returns to scale in water and sanitation: estimates for Latin Amercia]
      ," MPRA Paper 20324, University Library of Munich, Germany, revised Jan 2010.

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