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On the Impact of Productive Efficiency and Quality of a Regulated Local Public Utility Upon Final Goods Prices and Consumer's Welfare

  • Alessandro Petretto


    (University of Florence)

In this paper, we analyse 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 sae geographic area. The regulation rules we consider are twofold: a Price-Cap mechanism and a Minimum Quality Standard constraing, both largely applied in the practice of public utilities regulation in industrialised countries. In particular in Italy these rules are applied in water and waste collection services. 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 via changes on tariffs, external effects and final goods prices.

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Article provided by GDE (Giornale degli Economisti e Annali di Economia), Bocconi University in its journal Giornale degli Economisti e Annali di Economia.

Volume (Year): 68 (2009)
Issue (Month): 3 (July)
Pages: 311-339

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Handle: RePEc:gde:journl:gde_v68_n3_p311-339
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  1. repec:cup:cbooks:9780521336017 is not listed on IDEAS
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  14. Bennett, John & Iossa, Elisabetta, 2006. "Building and managing facilities for public services," Journal of Public Economics, Elsevier, vol. 90(10-11), pages 2143-2160, November.
  15. David Sappington, 2005. "Regulating Service Quality: A Survey," Journal of Regulatory Economics, Springer, vol. 27(2), pages 123-154, November.
  16. 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.
  17. Kevin M. Currier, 2007. "Quality-Corrected Price Caps," Bulletin of Economic Research, Wiley Blackwell, vol. 59(3), pages 255-268, 07.
  18. Owen, Gill, 2006. "Sustainable development duties: New roles for UK economic regulators," Utilities Policy, Elsevier, vol. 14(3), pages 208-217, September.
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