In practice, introducing competition in the piped water sector tends to be difficult. Both, competition in and competition for the market have several drawbacks due to the water market’s specificities. Nevertheless, we can not conclude that competition in the water industry is not useful or not possible to apply. The non-existence of competition tends to be an inferior situation – even when the monopoly is driven by public authorities. Experience in practice shows that public water supply does not necessarily secures efficient and high-quality water supply. In both, developed and less-developed countries many governments started to introduce privatisation due to a lack of financial resources or due to a lack of know-how. Privatisation is therefore widely seen as a way to overcome the failure of public services. However, it is important to note that privatisation itself is not expected to be a superior alternative. For good reasons, one might be even more concerned about private monopolies. Privatisation has to be accompanied by the introduction of competition. In any sector, competition tends to foster technical progress, to increase efficiency and to lower retail prices. Even when water market’s specificities make competition less intense or more complex to apply, it may be useful to introduce at least some degree of competition. However, it is necessary to count for these specificities when applying a competition scheme and when defining the relevant regulatory framework. Regulation has to ensure high quality of supply, high connection rates, efficiency by the use of economies of scale and affordable retail tariffs.


Welfare Gain Retail Prex Pipe Network Water Industry Investment Incentive 
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© Deutscher Universitäts-Verlag | GWV Fachverlage GmbH, Wiesbaden 2006

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