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Scale economies and optimal size in the Swiss gas distribution sector

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  • Alaeifar, Mozhgan
  • Farsi, Mehdi
  • Filippini, Massimo

Abstract

This paper studies the cost structure of Swiss gas distribution utilities. Several econometric models are applied to a panel of 26 companies over 1996–2000. Our main objective is to estimate the optimal size and scale economies of the industry and to study their possible variation with respect to network characteristics. The results indicate the presence of unexploited scale economies. However, very large companies in the sample and companies with a disproportionate mixture of output and density present an exception. Furthermore, the estimated optimal size for majority of companies in the sample has shown a value far greater than the actual size, suggesting remarkable efficiency gains by reorganization of the industry. The results also highlight the effect of customer density on optimal size. Networks with higher density or greater complexity have a lower optimal size.

Suggested Citation

  • Alaeifar, Mozhgan & Farsi, Mehdi & Filippini, Massimo, 2014. "Scale economies and optimal size in the Swiss gas distribution sector," Energy Policy, Elsevier, vol. 65(C), pages 86-93.
    • Handle: RePEc:eee:enepol:v:65:y:2014:i:c:p:86-93
    DOI: 10.1016/j.enpol.2013.09.038
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    Cited by:

    1. Ajayi, V. & Pollitt, M., 2022. "Changing times: Incentive regulation, corporate reorganisations, and productivity in the Great Britain’s gas networks," Cambridge Working Papers in Economics 2254, Faculty of Economics, University of Cambridge.
    2. Goncharuk, Anatoliy G. & Storto, Corrado lo, 2017. "Challenges and policy implications of gas reform in Italy and Ukraine: Evidence from a benchmarking analysis," Energy Policy, Elsevier, vol. 101(C), pages 456-466.
    3. Victor Ajayi & Michael G. Pollitt, 2022. "Changing times: Incentive regulation, corporate reorganisations, and productivity in Great Britain’s gas networks," Working Papers EPRG2214, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    4. Byoung-Kuk Ju & Seung-Hoon Yoo & Chulwoo Baek, 2022. "Economies of Scale in City Gas Sector in Seoul, South Korea: Evidence from an Empirical Investigation," Sustainability, MDPI, vol. 14(9), pages 1-14, April.
    5. Jan K. Kazak & Joanna A. Kamińska & Rafał Madej & Marta Bochenkiewicz, 2020. "Where Renewable Energy Sources Funds are Invested? Spatial Analysis of Energy Production Potential and Public Support," Energies, MDPI, vol. 13(21), pages 1-26, October.
    6. Gugler, Klaus & Liebensteiner, Mario, 2019. "Productivity growth and incentive regulation in Austria's gas distribution," Energy Policy, Elsevier, vol. 134(C).
    7. Capece, Guendalina & Costa, Roberta & Di Pillo, Francesca, 2021. "Benchmarking the efficiency of natural gas distribution utilities in Italy considering size, ownership, and maturity," Utilities Policy, Elsevier, vol. 72(C).
    8. Gonzalo Escobar Elexpuru & Ivan Valdes De la Fuente, 2021. "Economies of Scale in the Payment Card Market in Chile," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(2), pages 67-81.
    9. Jeong-Joon Yu & Seung-Hoon Yoo & Chulwoo Baek, 2019. "Economies of Scale in the South Korean Natural Gas Industry," Energies, MDPI, vol. 12(8), pages 1-10, April.
    10. Romano, Teresa & Cambini, Carlo & Fumagalli, Elena & Rondi, Laura, 2022. "Setting network tariffs with heterogeneous firms: The case of natural gas distribution," European Journal of Operational Research, Elsevier, vol. 297(1), pages 280-290.

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