Private ownership form and productive efficiency: Electric cooperatives versus investor-owned utilities

Property rights theory predicts that private firms whose ownership shares are not tradable will not be managed efficiently. This paper tests that theory by comparing the costs of rural electric cooperatives (RECs) and investor-owned electric utilities (IOUs). Separate translog cost functions are estimated for the RECs and the IOUs. The estimated costs of producing several three-product output bundles are then compared across ownership form under the assumption that all firms face identical input prices. The empirical results suggest that the cooperative sector of the electric power industry produces its output in a much less efficient manner than does the investor-owned sector.I would like to thank David Kaserman, Steven Caudill, T. Randolph Beard, Daniel Gropper, and David Laband for their many helpful comments on earlier drafts of this paper. This research was partially funded by the Auburn University Utilities Research Center. The views expressed here are the author's and do not necessarily reflect those of the New York State Public Service Commission.     

Mutual,non‐profit or public interest company? An evaluation of options for the ownership and control of water utilities

The purpose of this paper is to evaluate various organizational models for the ownership and control of natural monopolies – specifically the infrastructure of water and sewage provision in England and Wales. First, it summarizes recent discussion of who should own water assets in Britain. The paper notes the opportunity that has arisen for increased consumer involvement, and examines the relative merits of three models that have been suggested as alternatives: a non‐profit trust or company, a public interest company, and a consumer mutual. Five criteria are suggested for evaluating the merits of each type: its ability to safeguard the interests of the most important stakeholder, the consumer; avoid the necessity for a heavy regulatory regime; incentivize management to manage efficiently but without ‘producer capture’; raise capital relatively cheaply; and resist pressures to demutualize. The paper agrees with the recent paper in this Journal by Morse (2000) that, in theory, the consumer mutual has advantages. It draws on Hansmann’s work that suggests consumer ownership of water would be less costly than investor‐ownership, providing there are no large conflicts of interest between different types of consumer. Hansmann’s thesis is expanded to consider the likely benefits from wider member participation, and the hidden costs of not taking members into account. It then tests out whether customers would be motivated in practice to be active members, introducing a theoretical model of what motivates members of co‐operatives and mutuals to participate. The conclusions are that provided managers and board members are committed to encouraging member participation, the consumer mutual model would work well. It would need only light regulation, would avoid producer capture, and would be able to raise capital fairly easily, both from money markets and from members. It would need legislation to prevent it from being demutualized at some time in the future. However, if a participatory corporate culture cannot be guaranteed, or if there is a risk of decline of participation over time, other options such as a non‐profit trust or a public interest company would be less risky.     

"SMART" GUNS: A TECHNOLOGICAL FIX FOR REGULATING THE SECONDARY MARKET

A "personalized" or "smart" gun will not fire unless it is being used by an authorized individual. Such guns have the potential to reduce the negative externalities of gun ownership while preserving the benefits. Ongoing efforts to develop practical "smart" designs make it timely to consider regulations that would favor or mandate them in the market for new guns. The likely consequences would depend on the design details, in particular the costs of transferring the "key" to firing such guns. With an "ideal" design, transferring the key would require special equipment that could be monitored by appropriate authorities. The result would be to block thefts and other transfers of such guns in the secondary market and, in the long run, reduce access by individuals who are proscribed from possessing a gun. Personalized guns, therefore, could make existing firearms regulations more effective and reduce the social costs associated with gun misuse. Though personalized guns have advantages relative to standard guns in a wide variety of situations, some of the potential benefits of personalized guns could be captured through alternative policy measures.     

WELFARE ENHANCING COORDINATION IN CONSUMER COOPERATIVES UNDER MIXED OLIGOPOLY

The recent globalization of world economies has led the retail markets of developed countries towards increasing levels of integration and strategic interdependence. A non negligible share of retail and food markets is currently served by co‐operative societies. Consistently with this trend, the consumer cooperatives have recently experienced increasing levels of integration. The main aim of this paper is to study the welfare effects of coordination among consumer cooperatives competing in quantities in a mixed oligopoly against profit‐maximizing firms. We show that, in absence of agency problems, under increasing or constant returns to scale a higher output coordination of the consumer cooperatives does not affect the total welfare as long as a nonnegative profit constraint holds in these firms. On the other hand, under decreasing returns to scale, the consumer cooperatives contribute more to social welfare when acting on behalf of all consumers. This is because, by coordinating consumers’ preferences, these firms can reduce their market output, thus helping the market to come closer to the first best. All together these results seem to provide an argument in favour of the recent process of integration involving consumer cooperatives in many developed countries.     

Governance Alternatives and Pricing in the U.S. Electric Power Industry

Alternative governance mechanisms can be expected to resultin differences in enterprise performance. This research analyzesthe prices charged by U.S. electric utilities using a comprehensivepricing model and a large and detailed dataset that controlsfor enterprise costs and subsidies. It finds that public ownershipis associated with significantly lower prices than with privatelyowned utilities, most likely because the latter are subjectto regulation. Also associated with lower prices are electedcommissioners (rather than those appointed by state governors),commissions with fewer members, and utilities whose governingbodies hold open meetings–all characteristics that implymore direct consumer influence on the price-determination process.Among customer groups, residential users are the biggest beneficiariesof public ownership, while industrial users appear to have moreinfluence with elected state regulatory commissions. These findingsare reconciled with theory and help explain the sometimes ambiguousresults of previous studies.     

治理环境污染的经济制度安排

环境问题的外部性和环境资源的公共财产属性,决定了解决环境污染问题不能单纯依靠市场机制,需要政府的必要调控和干预,政府干预包括有关法规的制定和经济制度的安排。经济制度具有不可替代的效率作用,且应针对不同的情况安排与市场机制相沟通的不同制度形式,如“排污收费”,“治污收费”,“开征环境税”和“排污权交易”等,将环境保护由过去的政府行为转变为一种由政府调控与经济利益机制驱动相结合的市场行为和企业行为。     

The comparative advantage of public ownership: evidence from U.S. electric utilities

Abstract.  Studies of the performance effects of public vs private ownership have found mixed evidence. This paper draws on theory suggesting that public enterprise may have an advantage in producing goods and services whose quality attributes are difficult to specify a priori. Using a comprehensive data set of U.S. electric utilities to estimate cost functions, we find that while privately owned systems achieve lower costs in generation, public systems generally have an advantage in the end‐user‐oriented distribution function with its more non‐contractible quality attributes. Other evidence on quality differences by ownership type and by enterprise size supports this distinction. JEL classification: L33, L94     

Contractual distortions in a market with frictions

This paper analyses contract design in a decentralized market environment with frictions. While principals (e.g., firms) have all contractual power, their market power is constrained as agents (e.g., workers) can choose to wait and search for better offers. We find that results depend crucially on how market frictions affect agents’ utilities. With type-independent costs of search and waiting, equilibrium contracts are always first-best. If agents are impatient and discount future payoffs, however, distortions vanish only gradually. In the latter case, we also characterize equilibrium offers and show that the market exhibits two types of externalities, both of which are absent in the case of type-independent costs of search.     

股权结构、会计稳健性与资本投资效率研究综述

公司的股权结构引发利益相关者间的委托代理问题和信息不对称问题,从而导致公司的非效率投资行为,而会计稳健性作为一种协调公司契约各方利益冲突的机制,它能有效降低契约各方的代理成本,在中国资本市场中提高会计稳健性有其现实意义,并且应充分体现会计稳健性的治理价值。     

INTERNATIONAL TRENDS IN WATER UTILITY REGIMES

ABSTRACT ** :  This paper provides the taxonomy of country experiences in managing their water utilities. Institutions for water supply for various uses and their financial implications are analysed. Different episodes of governmental intervention in water supply and charging are examined. From the survey of different regimes and the existing literature, cost recovery and affordability emerge as the major building blocks for any reform of water utilities. Privatization of water services in terms of ownership change, public-private arrangements and international involvement seems to be a mixed blessing and donor assistance to water projects raises issues in international inequality and does not increase cost recovery levels. Cost recovery is positively associated with economic development, institutional quality and performance of water utilities.     

When Can Public Policy Makers Rely on Private Markets? The Effective Provision of Social Services

The privatisation of social services is being increasingly discussed. The social services market is characterised by multiple market failures, including informational asymmetries, agency problems, externalities, and distributional concerns. Consumers may care as much or more about quality of services than about price. If quality is readily observable, the government can regulate private providers to assure standards are met. But when standards are difficult to observe or when the recipient is not the agent who makes the decisions, government ownership may be preferable. This paper categorises the market situations in which government provision of social services is likely to be most versus least attractive.     

包容型人才开发模式对高校科技成果创新质量的影响机制研究

增强高校源头供给能力，提高科技成果创新质量是解决当前科技成果转化率不高的有效路径。整合人力资源管理理论、社会交换理论、市场导向理论和创新质量理论，以科技成果转化为背景，引入心理所有权作为中介变量、市场导向作为调节变量，构建包容型人才开发模式与创新质量间的理论模型，并利用多元回归方法进行实证分析。结果表明：包容型人才开发模式对创新质量具有显著正向影响；心理所有权在包容型人才开发模式和创新质量间存在中介作用；市场导向在心理所有权与创新质量间具有调节作用。     

Regulatory Institutions And Structures

This article presents a legal perspective on regulatory institutions, procedures and processes. Analysis of legal instruments examines justifications for regulatory interventions, and considers the inadequacies of private law remedies to instances of market failure (such as monopolies, inadequate or asymmetric information, externalities and co–ordination problems). A distinction is drawn between social and economic regulation: the former deals with such matters as health and safety, and environmental and consumer protection; and the latter is needed where there is insufficient competition. Instruments of social regulation include prior approval, mandatory standards and information disclosure. A range of instruments of economic regulation is also assessed, including competition law, public ownership, price and quality regulation, and competitive public franchising. Analysis of regulatory processes focuses on regulatory rule–making, delegated regulation and self–regulation. Particular weight is given to different forms of accountability—financial, procedural and substantive—which draws attention to the significance of the public interest dimension of regulatory systems.     

Towards a synthesis of theories of State failure

This paper examines the three main categories of State intervention. Before approaching the analysis of intervention, I attempt to shed light on the forming of social choices and the decisions of State rulers. I show how market process and property rights solve problems pertaining to social choice, which in turn stems from the application of the majority rule in a democratic society. Along these lines I view how the State fails to regulate externalities, stabilize the economy and redistribute income. For this purpose the following research applies the theory of property rights, the theory of rational expectations and the theory of public choice respectively to each of the above problems. The conclusion points to a synthesis of these theories, offering a highly demonstrative categorical framework of critique against State intervention. The argument claims that independent non-collective institutions work better than State intervention. (JEL: P16, D72, H23)     

PRICING FOR WATER CONSERVATION

Water utilities tend not to use prices to encourage conservation. Many utilities still use declining block rates. Even after switching to ascending blocks, however, some have hookup charges that amount to fixed charges of more than half the cost of water. Converting the hookup charge from aflat amount to an amount based on actual water use could lead to substantial savings in usage and cost. In Denver, where a hookup charge now is equivalent to $400 per year added to one's mortgage, the savings in usage that would result from a usage-based hookup charge are estimated at between 9 and 32 percent of total use. A usage-based hookup charge would substitute for a proposed dam costing more than $500 million. Structuring prices to control usage would be far simpler than implementing the conservation programs now being proposed in some water utilities, would result in lower water costs for anyone desiring lower costs, and would allow individuals to choose whether to conserve but require them to pay the costs of their decision.     

Vertical product differentiation under demand uncertainty

In this paper, I examine a quality-then-price game in a fully covered market where firms are uncertain about consumer tastes regarding quality. The equilibrium is characterized under the fixed costs and variable costs of quality improvement, respectively. It is shown that the uncertainty is a differentiation force, and the quality differentiation increases more under variable costs than under fixed costs. In addition, an increase in uncertainty leads to higher profits and higher social welfare regardless of whether under fixed or variable costs. This result contrasts with the lower welfare in the Hotelling model with uncertainty. Finally, an analysis of the case of partial market coverage with uncertainty completes this paper.     

基于产权分离的生态产权制度优化研究

文章在梳理产权与生态产权的主要文献以及分析归纳中国生态产权制度运行低效的深层次原因的基础上,提出以“非开发性所有权”为核心概念的生态产权制度优化的理论依据和可能的实践路径,并基于博弈理论采用嵌入激励机制的多阶段双边拍卖模型论证了“非开发性所有权”贝叶斯均衡价格的存在性。研究表明：(1)生态领域的根本利益冲突,既是生态产品极强的正外部性且无法内部化或市场化所引致的,也是产权制度失效的根本成因;(2)基于产权的可分离性原理,可以构建涵盖“非开发性所有权”和“开发性所有权”等权利相兼容的生态产权制度;(3)建立以“非开发性所有权”为交易品的市场,可以作为生态产权制度的优化路径,同时也是生态产品正外部性得以内部化的有效路径;(4)政府生态购买,是生态产权制度优化路径的有效实现形式。当引入激励机制时,基于不完全信息的多阶段双边拍卖机制能够实现贝叶斯均衡的理论购买价格。上述分析内容可以作为生态产权制度改革的政策工具。     

A long-run cost allocation problem in the political economy of electric utility power pools

Summary and Conclusions Discussants of the electric power industry point to three principal reasons for corporately unaffiliated electric utility companies to establish formal interorganizational relations: optimal short-run dispatching of production facilities, the scale economies (more precisely, the subadditivity) of long-run costs, and the advantage of pooling the risk of equipment failure. This paper has analyzed the organizational properties of power pools established to realize the advantages of subadditive long-run costs. A formal organizational model of a power pool was presented, recognizing the economic and normative structure of a pool. The normative structure chosen was the subsidy freedom equity concept familiar in the literature on natural monopoly and in game theory. The principal result of the paper is the construction of a subsidy-free cost allocation rule for the deterministic multiple-technology long-run system planning problem.The applicability of this result depends on the organization of the power pool as an entity capable of contracting for the power needed by the members. Conspicuously in the model used here, the optimal poolwide cost is allocated but ownership of the generating plants is not.In power ppols of independently owned utilities (IOUs), capacity planning may be centralized but, with the exception of joint ventures in individual generating plants, ownership is maintained at the level of the member firms. IOU power pools allocate separately the fixed and variable costs of the system. Pool members often take turns in building new plants for the pool, thereby indirectly allocating system capacity costs. Having identifiable ownership in the generating plants, the members can allocate the energy costs of the system in a subsidy-free manner using the short-run marginal cost of energy established by central dispatching or energy brokering (Herriot 1985). But that is an approach to short-run energy charges which is very differet from the energy charge in the peaker rule studied here, and it may result in an allocation of total costs that is not subsidy-free.There are partnership among rural electric distribution cooperatives, called generation and transmission (G&T) co-ops, which do share costs without allocating ownership interests. G&T co-ops build generating plants or secure power contracts from IOUs sufficient to meet their members' requirements at an agreed level of reliability. Ownership of the plants, and liability for the contracts, is not disaggregated. Yet in most cases the G&T co-op does not sell power to non-members, so all costs must be allocated among the member firms.The ownership structure presumed here could also obtain under the scenarios for electric power deregulation envisioned by Joskow and Schmalensee (1983). If the distribution segment is disaggregated from generation and transmission, then locally franchised distribution firms mist face in common the subadditive long-run cost function discussed in the second section. The regional bulk power market would therefore have the structure of a natural monopsony, so the distribution firms would have an incentive to pool their forecast loads and collectively negotiate long-term power contracts with the independent generating firms. Ownership of generation would rest with the generation firms, but the cost of the regionally optimal portfolio of power contracts would have to be allocated among the pooled distribution firmsThe deterministic system planning model used here is somewhat simplistic, certainly as must any model to be admit a closed-form solution in a contexts where the real capacity planning problems are solved using very large scale linear programs and simulation. However, the cost allocation rule derived for this model may be useful guidepost for the development of practical cost-sharing rules in power pools. An important implication of the peaker rule (4) is the equity of not attempting to allocate separately the fixed and variable costs of a system. Though adjustments must be made to the peaker rule to account fully for the uncertainties, indivisibilities, unreliabilities, and nonhomogeneities faced by system planners, as well as for the growth of future loads and the development of new generation technologies, this cost-allocation rule appears to be helpful as a starting point in power pool rate design.     

PRIVATIZATION OF WATER: EVALUATING ITS PERFORMANCE IN THE DEVELOPING WORLD

Private‐sector provision of water has been promoted in developing countries since 1990 in order to expand water service coverage to low‐income households. Decades later, the consequences of privatizing water utilities are still disputed. Some scholars have found that areas with privatized water services see positive development effects, while others contend that the private‐sector supply of a social good will always lead to its under‐provision. However, does more privatization of water provision in developing countries actually bring about more access to water? This paper hypothesizes that more private participation in water provision will not ensure more access to water at the national level. The relationship is tested using data on weighted percentages of private ownership of water utilities, and access to improved water sources from 1990 to 2015 across 62 countries. Multivariate OLS results indicate a positive relationship but with no statistical significance. 2SLS results, on the other hand, indicate a positive, small and statistically significant effect of water privatization on water access. Nonetheless, the causal mechanism behind these results must be further explored, given that the measured effect could be capturing the result of an increase in investment that is associated with private ownership of water utilities.