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articles: Identifying network density and scale economies for Japanese water supply organizations

Author

Listed:
  • Fumitoshi Mizutani

    () (Graduate School of Business Administration , Kobe University, 2-1 Rokkodai, Nada-ku, Kobe 657-8501, Japan)

  • Takuya Urakami

    () (Graduate School of Business Administration , Kobe University, 2-1 Rokkodai, Nada-ku, Kobe 657-8501, Japan)

Abstract

Within this analysis we determine the optimal size (that is, with the minimum average cost) of a water supply enterprise and reconsider the matter of scale economies, using sample data from Japanese water supply organizations. After surveying evidence from previous studies of scale economies in the water supply industry, we estimate cost functions with three different cost models: the log-linear, translog and translog with a hedonic function. We obtain the result that economies of network density do exist, but that there are slight diseconomies of scale at the sample mean point. The optimal size of a water supply organization would be one supplying a population of approximately 766,000 people.

Suggested Citation

  • Fumitoshi Mizutani & Takuya Urakami, 2001. "articles: Identifying network density and scale economies for Japanese water supply organizations," Papers in Regional Science, Springer;Regional Science Association International, vol. 80(2), pages 211-230.
  • Handle: RePEc:spr:presci:v:80:y:2001:i:2:p:211-230
    Note: Received: 10 March 2000
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    Keywords

    Economies of scale; water supply; optimal size; average cost; translog cost function;

    JEL classification:

    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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