The Appropriateness of the Poolability Assumption for Multiproduct Technologies: Evidence from the English Water and Sewerage Utilities

Anna Bottasso, Maurizio Conti, Massimiliano Piacenza and Davide Vannoni

No 183, Carlo Alberto Notebooks from Collegio Carlo Alberto

Abstract: The empirical literature on the cost structure of multiproduct firms (e.g., public utilities providing in combination gas, water, and electricity) traditionally assumes a common technology across different products and stages of production, letting the issue of poolability unexplored. The appropriateness of this assumption is tested here by estimating a General cost function for samples of UK specialized and sewerage-diversified water utilities. The results show the existence of both aggregate scale economies and diseconomies of scope; more interestingly, the hypothesis that the two groups of water companies share the same technological parameters is rejected. Given the implications of this finding in terms of optimal industry configuration and possible restructuring policies (e.g., mergers and/or divestitures), our test suggests caution in pooling samples when undertaking empirical studies on data which refer to multiproduct technologies.

Keywords: Multiproduct technologies; Water and sewerage utilities; Poolability; General cost function (search for similar items in EconPapers)
JEL-codes: C52 C81 D24 L52 L95 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: The appropriateness of the poolability assumption for multiproduct technologies: Evidence from the English water and sewerage utilities (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:cca:wpaper:183

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