The Public Firm and Strategic Interaction: The Case of Public Waste Water Management
Usually public monopoly firms have the task of providing services while covering costs with the revenue from charges paid by users. From the literature it is known that if users take the charge as given, the zero-profit constraint of the public firm results in an inefficient allocation of resources. In this paper, it is shown that the inefficiency will be completely corrected if the not-for-profit supplier faces a surplus-maximising single purchaser. The model has been applied to analyse the efficiency of public wastewater management, but it also has regulatory implications for other markets that cannot be liberalised.
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Volume (Year): 158 (2002)
Issue (Month): 2 (June)
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References listed on IDEAS
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- Pethig, Rudiger, 1989. "Efficiency versus self-financing in water quality management," Journal of Public Economics, Elsevier, vol. 38(1), pages 75-93, February.
- Boiteux, M., 1971. "On the management of public monopolies subject to budgetary constraints," Journal of Economic Theory, Elsevier, vol. 3(3), pages 219-240, September.
- Daniel F. Spulber, 1989. "Regulation and Markets," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262192756, March.
- Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, March.
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