Alessandro Petretto

Investment Incentives and Industrial Organization of a Network Local Public Utility

  • Abstract

Informations and abstract

Keywords: Economics of Regulation, Local Utilities, Network access.

The paper explores the cost-benefit of the separation of the function of managing networks and plants activities from the function of providing the final service to users for a public utility organised as a local natural monopoly. The article analyses in particular the problem of investment incentives, given the different information structures of the two considered organizational alternatives. It turns out that the integrated solution gives rise to more socially productive investments and to lower tariffs than the unintegrated one. However the former can be socially desirable provided it doesn't imply a too high public outlay and a too strong reduction in service quality.

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