Date: 2015
Type: Article
Water under the bridge : determinants of franchise renewal in water provision
Journal of law, economics and organization, 2015, Vol. 31, No. 1, pp. 3-39[Florence School of Regulation], [Water]
CHONG, Eshien, SAUSSIER, Stéphane, SILVERMAN, Brian S., Water under the bridge : determinants of franchise renewal in water provision, Journal of law, economics and organization, 2015, Vol. 31, No. 1, pp. 3-39[Florence School of Regulation], [Water] - https://hdl.handle.net/1814/39309
Retrieved from Cadmus, EUI Research Repository
Williamson's 1976 study of natural-monopoly franchise bidding launched extensive debate concerning the degree to which transaction-cost problems afflict government franchising. We propose that municipalities vary in ability to discipline franchisees, and that this heterogeneous ability affects franchise renewal patterns and the quasi-rents that franchisees extract. We study provision of municipal water services in France, a setting characterized by both direct public provision and franchised private providers. We find that small municipalities pay a significant price premium for franchisee-provided water when compared with publicly provided water; in contrast, large municipalities do not pay a premium on average. Further, large municipalities are less likely to renew an incumbent franchisee that charges an “excessive” price, while small municipalities’ renewal patterns are not influenced by franchisees’ excessive pricing. We interpret the results as evidence that although large municipalities can discipline franchisees and thus prevent extraction of quasi-rents, small municipalities are less able to do so due to weaker outside options.
Additional information:
First published online: 9 June 2015
Cadmus permanent link: https://hdl.handle.net/1814/39309
Full-text via DOI: 10.1093/jleo/ewv010
ISSN: 1465-7341; 8756-6222
Series/Number: [Florence School of Regulation]; [Water]
Files associated with this item
Files | Size | Format | View |
---|---|---|---|
There are no files associated with this item. |