Costs,technology and ownership of gas distribution in Italy

This paper proposes an empirical study of the Italian gas distribution industry by means of long‐term cost function. The analysis highlights the fact that the number of customers is more important than the amount of gas delivered in explaining the variability of distribution costs. Very low economies of scale, high economies of density, and the significant role of the morphologic and demographic variables characterize the nature of the technology. Better performance for private operators indicates that the privatization process should continue and the low degree of economies of scale confirms the benefits of having many operators (yardstick competition). Copyright © 2000 John Wiley & Sons, Ltd.