Regulating Infrastructure: Monopoly, Contracts, and Discretion

by José A. Gómez-Ibáñez

Overview

In the 1980s and ’90s many countries turned to the private sector to provide infrastructure and utilities, such as gas, telephones, and highways—with the idea that market-based incentives would control costs and improve the quality of essential services. But subsequent debacles including the collapse of California’s wholesale electricity market and the bankruptcy of Britain’s largest railroad company have raised troubling questions about privatization. This book addresses one of the most vexing of these: how can government fairly and effectively regulate “natural monopolies”—those infrastructure and utility services whose technologies make competition impractical?

Rather than sticking to economics, José Gómez-Ibáñez draws on history, politics, and a wealth of examples to provide a road map for various approaches to regulation. He makes a strong case for favoring market-oriented and contractual approaches—including private contracts between infrastructure providers and customers as well as concession contracts with the government acting as an intermediary—over those that grant government regulators substantial discretion. Contracts can provide stronger protection for infrastructure customers and suppliers—and greater opportunities to tailor services to their mutual advantage. In some cases, however, the requirements of the firms and their customers are too unpredictable for contracts to work, and alternative schemes may be needed.

Product Details

ISBN-13:	9780674022386
Publisher:	Harvard University Press
Publication date:	09/01/2006
Edition description:	New Edition
Pages:	448
Product dimensions:	5.75(w) x 8.94(h) x 1.00(d)

About the Author

José A. Gómez-Ibáñez is Derek C. Bok Professor of Urban Planning and Public Policy, Graduate School of Design and Kennedy School of Government, Harvard University.

Table of Contents

Acknowledgments

1. Monopoly as a Contracting Problem

2. The Choice of Regulatory Strategy

Part I. Regulatory Politics and Dynamics

3. The Behavior of Regulatory Agencies

4. Capture and Instability: Sri Lankas Buses and U.S. Telephones

5. Incompleteness and Its Consequences: Argentinas Railroads

6. Forestalling Expropriation: Electricity in the Americas

Part II. Contract versus Discretionary Regulation

7. The Evolution of Concession Contracts: Municipal Franchises in North America

8. The Rediscovery of Private Contracts: U.S. Railroad and Airline Deregulation—with John R. Meyer

9. Price-Cap Regulation: The British Water Industry

Part III. Vertical Unbundling and Regulation

10. The Trade-off in Unbundling: Competition versus Coordination

11. Regulating Coordination: British Railroads

12. Designing Capacity Markets: Electricity in Argentina—with Martín Rodríguez-Pardina

13. The Prospects for Unbundling

14. The Future of Regulation

Notes

Index

What People are Saying About This

Regulating Infrastructure: Monopoly, Contracts and Discretion is a book that merges the modern economics of the firm with traditional regulatory concerns in an original and provocative way. It is a valuable contribution to the literature that should be read by anyone concerned with redefining regulation for the new Century.

Michael E. Levine

Regulating Infrastructure: Monopoly, Contracts and Discretion is a book that merges the modern economics of the firm with traditional regulatory concerns in an original and provocative way. It is a valuable contribution to the literature that should be read by anyone concerned with redefining regulation for the new Century.
— Michael E. Levine, Yale Law School

Editorial Reviews

Regulating Infrastructure: Monopoly, Contracts, and Discretion is a book that merges the modern economics of the firm with traditional regulatory concerns in an original and provocative way. It is a valuable contribution to the literature that should be read by anyone concerned with redefining regulation for the new century.

Michael E. Levine

Gómez-Ibáñez uses a rich set of case studies to analyse how and why...different institutional designs are chosen and reformed. The author's range is exceptionally wide: Sri Lanka, the U.S., Britain and Argentina; he tackles telecommunications, railroads, airlines, electricity, buses and water; and spans time periods from the 1950s to today. The result is a remarkable array of examples, information and analyses. In explaining institutional design, he offers a series of fascinating arguments using opportunism and transaction-cost analysis as a starting point rather than as a constraining simplifying theme.

Times Higher Education Supplement - Mark Thatcher

Gómez-Ibáñez uses a rich set of case studies to analyse how and why...different institutional designs are chosen and reformed. The author's range is exceptionally wide: Sri Lanka, the U.S., Britain and Argentina; he tackles telecommunications, railroads, airlines, electricity, buses and water; and spans time periods from the 1950s to today. The result is a remarkable array of examples, information and analyses. In explaining institutional design, he offers a series of fascinating arguments using opportunism and transaction-cost analysis as a starting point rather than as a constraining simplifying theme.
— Mark Thatcher

Times Higher Education Supplement