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Private Ownership Form and Productive Efficiency: Electric Cooperatives versus Investor-Owned Utilities


  • Berry, Dan Michael


Property rights theory predicts that private firms whose ownership shares are not tradable will not be managed efficiently. This paper tests that theory by comparing the costs of rural electric cooperatives (RECs) and investor-owned electric utilities (IOUs). Separate translog cost functions are estimated for the RECs and the IOUs. The estimated costs of producing several three-product output bundles are then compared across ownership form under the assumption that all firms face identical input prices. The empirical results suggest that the cooperative sector of the electric power industry produces its output in a much less efficient manner than does the investor-owned sector. Copyright 1994 by Kluwer Academic Publishers

Suggested Citation

  • Berry, Dan Michael, 1994. "Private Ownership Form and Productive Efficiency: Electric Cooperatives versus Investor-Owned Utilities," Journal of Regulatory Economics, Springer, vol. 6(4), pages 399-420, December.
  • Handle: RePEc:kap:regeco:v:6:y:1994:i:4:p:399-420

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    References listed on IDEAS

    1. Laffont, Jean-Jacques & Tirole, Jean, 1994. "Access pricing and competition," European Economic Review, Elsevier, vol. 38(9), pages 1673-1710, December.
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    5. Nicholas Economides & Lawrence J. White, 1995. "Access and Interconnection Pricing: How Efficient is the Efficient Component Pricing Rule?," Working Papers 95-04, New York University, Leonard N. Stern School of Business, Department of Economics.
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    8. Armstrong, Mark, 2001. "The theory of access pricing and interconnection," MPRA Paper 15608, University Library of Munich, Germany.
    9. Laffont, Jean-Jacques & Tirole, Jean, 1996. "Creating Competition through Interconnection: Theory and Practice," Journal of Regulatory Economics, Springer, vol. 10(3), pages 227-256, November.
    10. Koschat, Martin A & Srinagesh, Padmanabhan & Uhler, Linda J, 1995. "Efficient Price and Capacity Choices under Uncertain Demand: An Empirical Analysis," Journal of Regulatory Economics, Springer, vol. 7(1), pages 5-26, January.
    11. Ingo Vogelsang, 2003. "Price Regulation of Access to Telecommunications Networks," Journal of Economic Literature, American Economic Association, vol. 41(3), pages 830-862, September.
    12. Michael Reutter, 2001. "Regulation and Internet Access in Germany," CESifo Working Paper Series 480, CESifo Group Munich.
    13. Joan Calzada Aymerich, 2003. "Access by Capacity and Peak-Load Pricing," Working Papers in Economics 108, Universitat de Barcelona. Espai de Recerca en Economia.
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    Cited by:

    1. Laura Abrardi & Luca Colombo & Pier Angelo Mori, 2016. "Customer Ownership And Quality Provision In Public Services Under Asymmetric Information," Economic Inquiry, Western Economic Association International, vol. 54(3), pages 1499-1518, July.
    2. Greer, Monica Lynne, 2003. "Can rural electric cooperatives survive in a restructured US electric market? An empirical analysis," Energy Economics, Elsevier, vol. 25(5), pages 487-508, September.
    3. Mark A. Jamison, 2011. "Liberalization and Regulation of Telecoms, Electricity, and Gas in the United States," Chapters,in: International Handbook of Network Industries, chapter 21 Edward Elgar Publishing.
    4. Holstenkamp, Lars & Degenhart, Heinrich, 2013. "Bürgerbeteiligungsmodelle für erneuerbare Energien - Eine Begriffsbestimmung aus finanzwirtschaftlicher Perspektive
      [Citizen Participation Schemes for Renewable Energies - A Definition from a Finan
      ," MPRA Paper 81263, University Library of Munich, Germany.
    5. Wang, J.H. & Ngan, H.W. & Engriwan, W. & Lo, K.L., 2007. "Performance based regulation of the electricity supply industry in Hong Kong: An empirical efficiency analysis approach," Energy Policy, Elsevier, vol. 35(1), pages 609-615, January.
    6. Jamasb, T. & Pollitt, M., 2001. "Benchmarking and Regulation of Electricity Transmission and Distribution Utilities: Lessons from International Experience," Cambridge Working Papers in Economics 0101, Faculty of Economics, University of Cambridge.
    7. Mota, R.L., 2004. "‘Comparing Brazil and USA electricity performance; what was the impact of privatisation?’," Cambridge Working Papers in Economics 0423, Faculty of Economics, University of Cambridge.
    8. Lehto, Eero, 2011. "Electricity prices in the Finnish retail market," Energy Policy, Elsevier, vol. 39(4), pages 2179-2192, April.
    9. Jamasb, T. & Pollitt, M., 2000. "Benchmarking and regulation: international electricity experience," Utilities Policy, Elsevier, vol. 9(3), pages 107-130, September.

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