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Enhancing Efficiency of Water Supply – Product Market Competition versus Trade

Author

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  • Reto Foellmi

    (Massachusetts Institute of Technology)

  • Urs Meister

    (University of Zurich)

Abstract

This paper analyses and compares potential efficiency gains induced by the introduction of product market competition and cross boarder trade in the piped water market. We argue that due to the specific circumstances in the water sector product market competition, i.e. competition by common carriage is not expected to be very intensive. The connection of networks could alternatively be used for cross boarder trade between neighboured water utilities. We show that competition by common carriage leads to production incentives for the inefficient supplier. This implies that the retail prices tend to be lower than with cross border trade. However, the efficiency effect dominates and resulting welfare is higher in case of trade.

Suggested Citation

  • Reto Foellmi & Urs Meister, 2004. "Enhancing Efficiency of Water Supply – Product Market Competition versus Trade," Public Economics 0412012, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwppe:0412012
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    Cited by:

    1. Urs Meister, 2005. "Do welfare maximising water utilities maximise welfare under common carriage?," Others 0505001, University Library of Munich, Germany.
    2. Reto Foellmi & Urs Meister, 2005. "Product-Market Competition in the Water Industry: Voluntary Non-discriminatory Pricing," Journal of Industry, Competition and Trade, Springer, vol. 5(2), pages 115-135, June.

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    More about this item

    Keywords

    Water; Networks; Product-Market Competition; Trade; Bargaining;
    All these keywords.

    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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