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Resource Management and the Mayor's Guarantee in French Water Allocation

Author

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  • Ephraim Clark

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  • Gérard Mondello

Abstract

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

Suggested Citation

  • Ephraim Clark & Gérard Mondello, 2000. "Resource Management and the Mayor's Guarantee in French Water Allocation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 15(2), pages 103-113, February.
  • Handle: RePEc:kap:enreec:v:15:y:2000:i:2:p:103-113
    DOI: 10.1023/A:1008326220811
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    File URL: http://hdl.handle.net/10.1023/A:1008326220811
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    References listed on IDEAS

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    1. 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.
    2. 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.
    3. Steven Shavell, 1983. "Liability for Harm Versus Regulation of Safety," NBER Working Papers 1218, National Bureau of Economic Research, Inc.
    4. 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.
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    Citations

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    Cited by:

    1. Gérard Mondello, 2004. "Les conditions d’implantation des plans de prévention des risques naturels : une approche par la théorie des options réelles," Cahiers d'Economie et Sociologie Rurales, INRA Department of Economics, vol. 73, pages 35-70.
    2. Michele Moretto & Paola Valbonesi, 2004. "Opting-out in profit-sharing regulation," Industrial Organization 0403001, University Library of Munich, Germany.
    3. repec:wfo:wstudy:25399 is not listed on IDEAS
    4. Georg Meran, 2012. "Europäische Preisregulierungssysteme in der Wasserwirtschaft: Konzepte und Umsetzungsprobleme," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 81(1), pages 167-181.
    5. Ephraim Clark & Gérard Mondello, 2000. "Water Management in France: Delegation and Irreversibility," Journal of Applied Economics, Universidad del CEMA, vol. 3, pages 325-352, November.

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