09 November 2011

Papers at EAERE

I went to the EAERE conference in June, but I forgot to highlight three interesting papers (there were others, but I can't kill you!):

In "Private information, competition and the renewal of delegation contracts: an econometric analysis of water services in France," Canneva and Garcia write about market power among big water companies (a duopoly) in France.
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.
In "Water use adaptation and the role of demand side management," Steinhauser and Aisbett describe the factors -- roughly 30% price and 70% other factors -- reducing water demand in Australia during the drought.
Abstract: Australia experienced a serious drought over the last decade. As a consequence most municipalities had to introduce policies to reduce the water usage in their urban areas. The demand-management tools employed included, raising water prices, mandatory restrictions on certain types of water use, and approaches aimed at inducing a voluntary behavior change. We test the effectiveness of the various policy tools empirically using daily water use data for a single municipality over the period of 4½ years. We use extensive weather data controls and have data on information campaigns, water price, restrictions, voluntary usage targets, and dam storage levels. We observe large and significant effects from increasing restrictions on water use, and also economically and statistically significant effects which can be attributed to information campaigns and "altruistic" behavior. Perhaps surprisingly, we are unable to identify a significant price effect once we control for the level of use restrictions. We propose that the low price elasticity estimate is due to the binding nature of the restrictions throughout our sample, constraining consumption to the very low elasticity part of the demand curve. We conclude that at times of extreme water shortage, formal restrictions and encouragement of voluntary consumption reductions are at least as effective as price instruments.
In "Game-theoretic analysis of water-related infectious disease in rural areas of developing countries," Chami and Gillespie describe the interacting factors affecting disease transmission in LDCs.
Abstract: Minimization of water-related infectious disease matters for a healthful and productive population. This study provides new insight into problems of controlling endemic water-related disease, a particular problem of developing tropical states. A game-theoretic approach is used to develop models to delineate the behavioral patterns when communal water sources are used, knowledge of water-related infectious disease levels is considered, and water quality variations occur that may possibly affect the spread of infectious agents among humans. Panel data of 6,655 personal interviews from 2005-2007 were collected in the Kabarole District of Uganda to test theoretical projections.

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