Resource Management and the Mayor's Guarantee in French Water Allocation
This paper uses standard methods in stochastic calculus tomeasure the cost of the agency conflict that pits electedofficials of French municipalities against the communities theyrepresent in the management of the water supply. Under the Frenchlegal code, the municipalities are responsible for the watersupply and the elected officials are personally liable for anydamage due to negligence on their part. Uncertainty regardingexactly how negligence will be defined by the courts puts theelected officials in a precarious position. By delegatingauthority to an oligopoly of private firms, however, electedofficials can eliminate their personal liability, which istransferred to the delegated firm. Many studies argue thatdelegation locks communities into long-term contracts that areagainst their better interests. Thus, the agency conflict mayaffect the delegation decision to the detriment of the community.To determine whether or not this is true it is necessary to knowthe economic cost of the mayor's personal liability. Copyright Kluwer Academic Publishers 2000
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Volume (Year): 15 (2000)
Issue (Month): 2 (February)
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- Zeitouni, Naomi & Becker, Nir & Shechter, Mordechai, 1994. "Models of water market mechanisms and an illustrative application to the Middle East," Resource and Energy Economics, Elsevier, vol. 16(4), pages 303-319, November.
- Kolstad, Charles D & Ulen, Thomas S & Johnson, Gary V, 1990. "Ex Post Liability for Harm vs. Ex Ante Safety Regulation: Substitutes or Complements?," American Economic Review, American Economic Association, vol. 80(4), pages 888-901, September.
- Brian Arthur, W. & Ermoliev, Yu. M. & Kaniovski, Yu. M., 1987. "Path-dependent processes and the emergence of macro-structure," European Journal of Operational Research, Elsevier, vol. 30(3), pages 294-303, June.
- Steven Shavell, 1983. "Liability for Harm Versus Regulation of Safety," NBER Working Papers 1218, National Bureau of Economic Research, Inc.
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