Water and asymmetric information
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In the US, many (most?) public utilities are publicly held companies. To investors, they want to give the appearance of being profitable, state-of-the-art corporations. To public regulators, they want to give the appearance of needing price hikes and significant improvements in infrastructure. Doesn't this arrangement provide a sort of transparency by allowing anyone who is interested to compare information given to both sets of stakeholders? In other parts of the world, are contracts for the provision of public services more often given to privately held companies? If so, doesn't that exacerbate the asymmetric information problem?
What is the advantage of privatization if in the end we have a private company running a monopoly which suffers from exactly the same problems as a public corporation? Prices dictated by political decisions rather than market considerations, bad decisions causing big loses which end up being funded by the tax-payer, incentives to improve quality of service non-existent due to monopoly power, inflated director salaries being paid by the tax-payer, etc, etc... What is exactly the difference between such corrupted "private" enterprises and a 100% public corporation?
A: there's no difference between corrupt private and corrupt public. Private can do better with profit incentive and imported ideas; public can do better with long run customer service. Both need good oversight to avoid corruption. So watch the REGULATORS :)
Great exploration of an under-discussed point from Public Choice economics (people look out for themselves instead of those they are supposed to serve). Don't forget that the asymmetries extend to all bureaucracies, including the regulators from the government! I've tried to tackle these incentive/information issues here: http://ssrn.com/abstract=1929114