Integrated versus Separated Regulation: An Application to the Water Industry

David Barolini

Economics Discussion Papers from University of Essex, Department of Economics

Abstract: The regulation of monopolistic firms has been widely investigated in the economic literature. Particular emphasis has been placed on the relationship between the regulated monopolist and the regulator. The present work deals with problems that may arise from the presence of several regulators. If regulators have different objective functions, inefficiency is likely to arise. A theoretical model with two regulators, one monopolistic firm and a renewable natural resource is presented. In this set up the level of demand relative to the sustainable use of the water resource plays a major role. The main result is the characterization of the cases in which the outcome of the regulation actually differs between the integrated-regulator and the separate-regulator scenarios. We find that the main determinants of the equilibrium are the level of demand and the marginal environmental damage. The equilibria obtained are analyzed in terms of price, environmental tax levels, and in terms of welfare distribution among the components of the regulator(s)' objective function.

Keywords: Game theory; Water resources; Utilities Regulation; Independent Authorities (search for similar items in EconPapers)
Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://repository.essex.ac.uk/8899/ original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:esx:essedp:8899

Ordering information: This working paper can be ordered from
Discussion Papers Administrator, Department of Economics, University of Essex, Wivenhoe Park, Colchester CO4 3SQ, U.K.
ueco@essex.ac.uk

Access Statistics for this paper

More papers in Economics Discussion Papers from University of Essex, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Essex Economics Web Manager (econoweb@essex.ac.uk).