Tuesday, March 11, 2014
Marian W. Moszoro, University of California, Berkeley - Haas School of Business; Kozminski University; University of Navarra - Public-Private Sector Research Center; IESE Business School, discusses Public-Private Monopoly.
ABSTRACT: This paper presents comparative statics of organizational forms of natural monopoly in public utilities with a focus on co-ownership and co-governance. Private monopoly lowers output and increases price to maximize profit. Public monopoly incurs higher costs due to the lack of know-how. A regulated monopoly results in regulation costs to overcome informational asymmetries. A public-private partnership arises as an efficient organization mode when it enables the internalization of private know-how and saves regulation costs due to correspondingly sufficient private and public ownership and control. Public-private monopoly supports higher prices than marginal costs due to rent sharing, with its upper price frontier decreasing in private ownership.