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Do welfare maximising water utilities maximise welfare under common carriage?

Author

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  • Urs Meister

    (University of Zurich)

Abstract

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.

Suggested Citation

  • Urs Meister, 2005. "Do welfare maximising water utilities maximise welfare under common carriage?," Others 0505001, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpot:0505001
    Note: Type of Document - pdf; pages: 38
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/othr/papers/0505/0505001.pdf
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    References listed on IDEAS

    as
    1. 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.
    2. 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.
    3. Jihad Elnaboulsi, 2001. "Organization, Management and Delegation in the French Water Industry," Post-Print hal-00447923, HAL.
    4. Ephraim Clark & Gérard Mondello, 2000. "Water Management in France: Delegation and Irreversibility," Journal of Applied Economics, Universidad del CEMA, vol. 3, pages 325-352, November.
    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. De Fraja, Giovanni, 1991. "Efficiency and Privatisation in Imperfectly Competitive Industries," Journal of Industrial Economics, Wiley Blackwell, vol. 39(3), pages 311-321, March.
    7. Reto Foellmi & Urs Meister, 2004. "Enhancing Efficiency of Water Supply - Product Market Compoetition versus Trade," Working Papers 0025, University of Zurich, Institute for Strategy and Business Economics (ISU).
    8. 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 125-132, February.
    9. Michael Webb & David Ehrhardt, 1998. "Improving Water Services Through Competition," World Bank Other Operational Studies 11511, The World Bank.
    10. Hagen, Kare P, 1979. " Optimal Pricing in Public Firms in an Imperfect Market Economy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 81(4), pages 475-493.
    11. de Fraja, Giovanni & Delbono, Flavio, 1989. "Alternative Strategies of a Public Enterprise in Oligopoly," Oxford Economic Papers, Oxford University Press, vol. 41(2), pages 302-311, April.
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    Cited by:

    1. Reto Foellmi & Urs Meister, 2012. "Enhancing the Efficiency of Water Supply—Product Market Competition Versus Trade," Journal of Industry, Competition and Trade, Springer, vol. 12(3), pages 299-324, September.

    More about this item

    Keywords

    Water; Networks; Corporate Governance; Mixed Oligopoly;

    JEL classification:

    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water

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