Product-Market Competition in the Water Industry: Voluntary Non-discriminatory Pricing
Journal
Journal of Industry, Competition and Trade
ISSN
1566-1679
ISSN-Digital
1573-7012
Type
journal article
Date Issued
2005-01-01
Author(s)
Abstract (De)
Since franchise bidding in the piped water industry is problematic due to extensive investment requirements, product-market competition or common carriage is a valuable alternative for the introduction of competition. This paper analyses product-market competition by considering a simple model of interconnection where competition is introduced between vertically integrated neighbouring water suppliers. The model contains water markets specificities such as local and decentralised networks and related difficulties of regulating access charges. Even without any regulation, we show that: (i) an inefficient incumbent will give up its monopoly position and lower the access price far enough so that the low-cost competitor can enter his home market; (ii) efficiency of production will rise due to liberalisation; and (iii) in contrary to prejudicial claims, investment incentives are not destroyed by the introduction of competition for the market. Investments of low-cost firms may even increase.
Language
German
HSG Classification
contribution to scientific community
Refereed
No
Publisher
Springer
Publisher place
Dordrecht
Volume
5
Number
2
Start page
115
End page
135
Pages
21
Subject(s)
Eprints ID
184829