Local Monopoly, Network Effects and Technical Efficiency – Evidence from Taiwan’s Natural Gas Industry

Posted by D. Daniel Sokol

Ting-Kun Liu, Chaoyang University of Technology has written on Local Monopoly, Network Effects and Technical Efficiency – Evidence from Taiwan’s Natural Gas Industry.

ABSTRACT: This paper examines the optimal number of natural gas firms in each region of Taiwan. In order to separate large local monopoly companies from the small ones, this paper constructs a firm-level panel data analysis for the industry covering the period 1995-1999. The optimal number of firms in each region is estimated by using the minimum efficient scale theory. In addition, a non-neutral stochastic frontier production function is used to detect the impact of the local monopoly, the network effects and cost structure on the natural gas firms’ technical efficiency.