Efficiency Incentives for a Regulated Monopoly: Some Lessons from the English and Welsh Water Industry
In this study we analyze the evolution of operating cost efficiency for the English and Welsh water industry over the period 1995-2001 by estimating an heteroskedastic stochastic variable cost frontier. Aim of the paper is to analyze cost efficiency over a period characterized by significant changes in regulatory framework. The main results of this paper are that industry operating cost efficiency has improved and efficiency differentials among firms have steadily narrowed. We argue that this pattern of efficiency has been generated by the incentives provided by comparative and capital market competition which became fully operative after the 1994 price review.
Volume (Year): 97 (2007)
Issue (Month): 4 (July-August)
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