Franchising and Privatization

Increasing private sector participation to improve the efficiency of infrastructure services is a growing trend around the world. Some elements of most infrastructure activities exhibit "natural monopoly" characteristics, meaning that one...

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Main Author: Dnes, Antony W.
Format: Viewpoint
Language:English
Published: World Bank, Washington, DC 2012
Subjects:
Online Access:http://documents.worldbank.org/curated/en/1995/03/697564/franchising-privatization
http://hdl.handle.net/10986/11677
id okr-10986-11677
recordtype oai_dc
spelling okr-10986-116772021-06-14T11:04:23Z Franchising and Privatization Dnes, Antony W. DENATIONALIZATION INFRASTRUCTURE CONTRACTS MONOPOLIES MARKET COMPETITION FRANCHISE BIDDING NATURAL MONOPOLIES BIDDING COMPETITIVE MARKETS CONSUMERS ELECTRICITY GENERATION EVALUATED PRICE FRANCHISE INEFFICIENCY LEGISLATION MARKET COMPETITION NATURAL MONOPOLIES NATURAL MONOPOLY POLITICAL ECONOMY PRIVATE SECTOR PARTICIPATION REGULATORS SALES SUPPLIERS WELFARE ECONOMICS Increasing private sector participation to improve the efficiency of infrastructure services is a growing trend around the world. Some elements of most infrastructure activities exhibit "natural monopoly" characteristics, meaning that one or more services or products can be produced most cheaply by a single firm. This raises the issues of organizing an infrastructure industry so as to gain the advantages of production by a single firm, without encouraging monopolistic conduct. This Note discusses a franchise approach to problems of natural monopoly--franchise bidding schemes--proposed by Sir Edwin Chadwick, a Victorian social reformer and later promoted by Harold Demsetz in the United States. The essential idea is that monopoly franchises could be auctioned off to the bidder offering the most attractive terms. Competition through bidding ensures minimum selling prices because the winning franchise will lower prices until revenues just cover costs. Franchise schemes also may avoid pitfalls associated with traditional regulation of such industries or with their nationalization. The Note also discusses the advantages of a franchise system and the importance of contract design to a successful franchise system. 2012-08-13T15:42:16Z 2012-08-13T15:42:16Z 1995-03 http://documents.worldbank.org/curated/en/1995/03/697564/franchising-privatization Viewpoint. -- Note No. 40 (March 1995) http://hdl.handle.net/10986/11677 English Viewpoint CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Viewpoint Publications & Research
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
language English
topic DENATIONALIZATION
INFRASTRUCTURE
CONTRACTS
MONOPOLIES
MARKET COMPETITION
FRANCHISE BIDDING
NATURAL MONOPOLIES BIDDING
COMPETITIVE MARKETS
CONSUMERS
ELECTRICITY GENERATION
EVALUATED PRICE
FRANCHISE
INEFFICIENCY
LEGISLATION
MARKET COMPETITION
NATURAL MONOPOLIES
NATURAL MONOPOLY
POLITICAL ECONOMY
PRIVATE SECTOR PARTICIPATION
REGULATORS
SALES
SUPPLIERS
WELFARE ECONOMICS
spellingShingle DENATIONALIZATION
INFRASTRUCTURE
CONTRACTS
MONOPOLIES
MARKET COMPETITION
FRANCHISE BIDDING
NATURAL MONOPOLIES BIDDING
COMPETITIVE MARKETS
CONSUMERS
ELECTRICITY GENERATION
EVALUATED PRICE
FRANCHISE
INEFFICIENCY
LEGISLATION
MARKET COMPETITION
NATURAL MONOPOLIES
NATURAL MONOPOLY
POLITICAL ECONOMY
PRIVATE SECTOR PARTICIPATION
REGULATORS
SALES
SUPPLIERS
WELFARE ECONOMICS
Dnes, Antony W.
Franchising and Privatization
relation Viewpoint
description Increasing private sector participation to improve the efficiency of infrastructure services is a growing trend around the world. Some elements of most infrastructure activities exhibit "natural monopoly" characteristics, meaning that one or more services or products can be produced most cheaply by a single firm. This raises the issues of organizing an infrastructure industry so as to gain the advantages of production by a single firm, without encouraging monopolistic conduct. This Note discusses a franchise approach to problems of natural monopoly--franchise bidding schemes--proposed by Sir Edwin Chadwick, a Victorian social reformer and later promoted by Harold Demsetz in the United States. The essential idea is that monopoly franchises could be auctioned off to the bidder offering the most attractive terms. Competition through bidding ensures minimum selling prices because the winning franchise will lower prices until revenues just cover costs. Franchise schemes also may avoid pitfalls associated with traditional regulation of such industries or with their nationalization. The Note also discusses the advantages of a franchise system and the importance of contract design to a successful franchise system.
format Publications & Research :: Viewpoint
author Dnes, Antony W.
author_facet Dnes, Antony W.
author_sort Dnes, Antony W.
title Franchising and Privatization
title_short Franchising and Privatization
title_full Franchising and Privatization
title_fullStr Franchising and Privatization
title_full_unstemmed Franchising and Privatization
title_sort franchising and privatization
publisher World Bank, Washington, DC
publishDate 2012
url http://documents.worldbank.org/curated/en/1995/03/697564/franchising-privatization
http://hdl.handle.net/10986/11677
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