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Identifying network density and scale economies for Japanese water supply organizations**Parts of this article have been supported by the Ministry of Education's Science Research Fund

Author

Listed:
  • Mizutani, Fumitoshi
  • Urakami, Takuya

Abstract

Within this analysis we determine the optimal size (that is, with the minimum average cost) of a water supply enterprise and reconsider the matter of scale economies, using sample data from Japanese water supply organizations. After surveying evidence from previous studies of scale economies in the water supply industry, we estimate cost functions with three different cost models: the log†linear, translog and translog with a hedonic function. We obtain the result that economies of network density do exist, but that there are slight diseconomies of scale at the sample mean point. The optimal size of a water supply organization would be one supplying a population of approximately 766,000 people.

Suggested Citation

Handle: RePEc:eee:paresc:v:80:y:2001:i:2:p:211-230
DOI: 10.1111/j.1435-5597.2001.tb01795.x
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Keywords

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JEL classification:

  • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities
  • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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