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Do welfare maximising water utilities maximise welfare under common carriage?

  • Urs Meister

    (University of Zurich)

Due to the increasing discussion about liberalisation in the piped water industry municipal authorities in several European countries consider modifications of their water utilities’ structure such as legal constitution, business objectives or private participation. The purpose of this paper is to evaluate the extent to which it is socially optimal to compose water utilities as welfare or profit maximising companies when assuming the introduction of competition in the market based on common carriage – as applied in England and Wales. Using a game theoretic model of mixed oligopolies that contains water markets specificities we show that welfare tends to be higher in a regime, where utilities are instructed to maximise profits rather than welfare.

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File URL: http://128.118.178.162/eps/othr/papers/0505/0505001.pdf
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Paper provided by EconWPA in its series Others with number 0505001.

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Length: 38 pages
Date of creation: 03 May 2005
Date of revision:
Handle: RePEc:wpa:wuwpot:0505001
Note: Type of Document - pdf; pages: 38
Contact details of provider: Web page: http://128.118.178.162

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  1. Richard G. Harris & Elmer G. Wiens, 1980. "Government Enterprise: An Instrument for the Internal Regulation of Industry," Canadian Journal of Economics, Canadian Economics Association, vol. 13(1), pages 125-32, February.
  2. Hagen, Kare P, 1979. " Optimal Pricing in Public Firms in an Imperfect Market Economy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 81(4), pages 475-93.
  3. Reto Foellmi & Urs Meister, 2004. "Enhancing Efficiency of Water Supply – Product Market Competition versus Trade," Public Economics 0412012, EconWPA.
  4. Cremer, Helmuth & Marchand, Maurice & Thisse, Jacques-Francois, 1989. "The Public Firm as an Instrument for Regulating an Oligopolistic Market," Oxford Economic Papers, Oxford University Press, vol. 41(2), pages 283-301, April.
  5. Cowan, Simon, 1997. "Competition in the Water Industry," Oxford Review of Economic Policy, Oxford University Press, vol. 13(1), pages 83-92, Spring.
  6. Michael Webb & David Ehrhardt, 1998. "Improving Water Services Through Competition," World Bank Other Operational Studies 11511, The World Bank.
  7. Ephraim Clark & Gérard Mondello, 2000. "Water Management in France: Delegation and Irreversibility," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 325-352, November.
  8. De Fraja, Giovanni, 1991. "Efficiency and Privatisation in Imperfectly Competitive Industries," Journal of Industrial Economics, Wiley Blackwell, vol. 39(3), pages 311-21, March.
  9. de Fraja, Giovanni & Delbono, Flavio, 1989. "Alternative Strategies of a Public Enterprise in Oligopoly," Oxford Economic Papers, Oxford University Press, vol. 41(2), pages 302-11, April.
  10. Cowan, Simon, 1993. "Regulation of Several Market Failures: The Water Industry in England and Wales," Oxford Review of Economic Policy, Oxford University Press, vol. 9(4), pages 14-23, Winter.
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