Author： Garcia S.
Publisher： Springer Publishing Company
ISSN： 0924-6460
Source： Environmental and Resource Economics, Vol.26, Iss.1, 2003-09, pp. : 145-162
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Abstract
We consider the relationship between a local community and a private operator in charge of the water utility. An important feature of the model is the possibility of water network losses that are costly to the operator. We compute the first-best and asymmetric information solutions to the optimal contract, with private information on the operator's technology. Based on an econometric estimation of production cost and water demand for a panel of French local communities, we simulate the optimal contract solutions and show that asymmetric information has important consequences for the regulation of water public utilities.
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