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Competition as a Complement to Regulation

Richard P. Rozek

Year: 1985
Volume: Volume 6
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol6-No3-6
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Competition and regulation are often perceived to be in conflict, because regulation usually evolves in response to a failure of the market system. In the case of public utilities in the United States, the familiar argument is that production scale economies make it cheaper for a single firm to provide essential products or services than for two or more firms to do so. To take advantage of the production efficiencies but avoid the resource allocation problems inherent in monopoly levels of price and output, either assets are publicly owned or a privately owned firm is regulated.' In the first case, the incentive to maximize profits is replaced by the need to maximize political support.' Thus the price charged for output is less than the monopoly price. In the second case, states have created public utility commissions (PUCs) to control both access to the market and the monopolist's price and output decisions.

A Competitive Fringe in the Shadow of a State Owned Incumbent: The Case of France

Jean-Michel Glachant and Dominique Finon

Year: 2005
Volume: Volume 26
Number: Special Issue
DOI: 10.5547/ISSN0195-6574-EJ-Vol26-NoSI-8
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We examine what kind of competitive fringe has been built in France around the State owned incumbent without destroying it or significantly weakening its dominant position; what impacts has this particular reform process on the market in which the incumbent monopolist is still overly dominant; and what more can be done to strengthen the opening of the market while staying in this typical French policy framework (no industrial restructuring and no forced divestiture by the monopolist). We wonder if a larger window of opportunity will open up at some later date for contesting the position of the monopolist, especially when investment in generation resumes.

Effects of Privatization on Price and Labor Efficiency: The Swedish Electricity Distribution Sector

Erik Lundin

Year: 2020
Volume: Volume 41
Number: Number 2
DOI: 10.5547/01956574.41.2.elun
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I examine the effects of privatization, in the form of acquisitions, in the Swedish electricity distribution sector. As the majority of the distribution networks have remained publicly owned, I use a synthetic control method to identify the effects on price and labor efficiency. In comparison to their synthetic counterparts, I find that the acquired networks increased labor efficiency by 8-18 percent depending on model specification, while no effect is found on price. Thus, the evidence suggests economically meaningful efficiency gains but that these are not fed through to consumer prices. Robustness results using a conventional difference-in-differences estimator largely confirms the results, although the estimated efficiency gains are either comparable to or less pronounced than their synthetic control counterparts.

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