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Integrated versus Separated Regulation: An Application to the Water Industry

Barolini, David (2006) Integrated versus Separated Regulation: An Application to the Water Industry. Working Paper. University of Essex, Department of Economics, Economics Discussion Papers, Colchester.


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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.

Item Type: Monograph (Working Paper)
Uncontrolled Keywords: Game theory, Water resources, Utilities Regulation, Independent Authorities
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Users 161 not found.
Date Deposited: 28 Aug 2014 11:55
Last Modified: 28 Aug 2014 11:55

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