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Private information, competition and the renewal of delegation contracts: an econometric analysis of water services in France

Authors
  • Canneva, Guillem
  • Garcia, Serge
Publication Date
Jun 14, 2010
Source
HAL-UPMC
Keywords
Language
English
License
Unknown
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Abstract

In France, water supply and sanitation can be delegated to private operators by local communities. The renewal of delegation contracts is often considered to be insufficiently competitive. We hypothesize that this may be due to the fact that the incumbent operator knows the existing network better than his competitors. This type of private information creates what is referred to as a winner's curse during renewal auctions. We propose a methodology that makes it possible to distinguish this type of information from the more standard private information parameter that characterizes the idiosyncratic productivity of each operator. We have built a model that simultaneously explains the choice of operator made by the local community and the degree of competition during the renewal process. This selection model makes it possible to estimate prices in a second step without a selection bias.

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