Abstract
We consider the relationship between a localcommunity and a private operator in charge ofthe water utility. An important feature of themodel is the possibility of water networklosses that are costly to the operator. Wecompute the first-best and asymmetricinformation solutions to the optimal contract,with private information on the operator'stechnology. Based on an econometric estimationof production cost and water demand for a panelof French local communities, we simulate theoptimal contract solutions and show thatasymmetric information has importantconsequences for the regulation of water publicutilities.
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Garcia, S., Thomas, A. Regulation of Public Utilities under Asymmetric Information. Environ Resource Econ 26, 145–162 (2003). https://doi.org/10.1023/A:1025629503671
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DOI: https://doi.org/10.1023/A:1025629503671