In the paper we study the cost structure of a sample of Italian utility providing in combination gas, water and electricity. The estimates from a Composite cost function model (Pulley e Braunstein, 1992) highlight that costs are lower when multi-utility operate in high-density areas and when they are diversified also in other services (heating, sewerage, waste water treatment). However, global scope and scale economies are present only for multi-utility operating at low levels of user density (usually small-sized firms in rural areas), whereas they are absent for firms facing a high user density (usually larger-scale companies in urban areas). The fact that utility in the latter group do not benefit from cost synergies across services suggests that their diversification might be due to managerial and/or market power motivations.
Strategie multi-prodotto nei servizi di pubblica utilità: effetti della diversificazione e della densità dell’utenza
PIACENZA, Massimiliano;VANNONI, Davide
2003-01-01
Abstract
In the paper we study the cost structure of a sample of Italian utility providing in combination gas, water and electricity. The estimates from a Composite cost function model (Pulley e Braunstein, 1992) highlight that costs are lower when multi-utility operate in high-density areas and when they are diversified also in other services (heating, sewerage, waste water treatment). However, global scope and scale economies are present only for multi-utility operating at low levels of user density (usually small-sized firms in rural areas), whereas they are absent for firms facing a high user density (usually larger-scale companies in urban areas). The fact that utility in the latter group do not benefit from cost synergies across services suggests that their diversification might be due to managerial and/or market power motivations.
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