Core References

• Understanding Regulation: Theory, Strategy, and Practice New York: Oxford University Press, 1999, Chapter 19. Baldwin, Robert, and Martin Cave

  Describes regulation of service quality. Considers quality parameters, performance targets, economics of quality, and ways to value quality.

• Environmental Externalities, Congestion and Quality under Regulation in Infrastructure Regulation and Market Reform: Principles and Practice, edited by Margaret Arblaster and Mark Jamison. Canberra, Australia: ACCC and PURC, 1998, pp. 185-196. Forsyth, P.

  Argues that price cap regulation creates an incentive for the firm to supply a less than optimal level of quality, especially when access prices are regulated. Explains that congestion is essentially another aspect of quality, one that depends on the relationship of demand to capacity. Holds that because the firm cannot convert reductions in congestion into higher revenue because its price is capped, the firm has an incentive to provide too little capacity and allow congestion to be inefficiently high.

• Resetting Price Controls for Privatized Utilities: A Manual for Regulators Washington, D.C.: World Bank, 1999, Chapter 8. Green, Richard, and Martin Rodriguez Pardina

  States that price controls provide an incentive to the firm to reduce quality, so performance standards may be necessary. Explains methods of control.

• The Economics of Regulation: Principles and Institutions Cambridge, MA: MIT Press, 1988, Reissue Edition, vol. I, Chapter 2. Kahn, Alfred

  Explains why regulators should pay attention to the regulation of quality.

Sectoral References

ELECTRICITY

• Electricity Service Quality Incentives Scoping Paper Prepared for: Queensland Competition Authority, 4 July 2002. Meyrick and Associates

  Argues that price cap regulation provides incentives for the firm to decrease quality.

• Development of Multiple Interruption and Other Standards for Electricity Distribution: Consultation on Draft Determination of Overall Standard and Implementation Arrangements for Guaranteed Standard March 2004. Ofgem

  Summarizes responses on proposed Multiple Interruption performance standards in electricity distribution.

TRANSPORTATION

• Privatization and Regulation of Transport Infrastructure: Guidelines for Policymakers and Regulators World Bank Institute Development Study, World Bank, Washington, D.C., 2000. Estache, Antonio

  Discusses price and quality regulation issues that characterize the transport sectors.

• Urban Bus Toolkit: Tools and Options for Reforming Urban Bus Systems Public-Private Infrastructure Advisory Facility, World Bank. CPCS Transcom

  Offers practical advice to enact fundamental system reforms.

• Concessions for Infrastructure: A Guide to Their Design and Award Finance, Public Sector, and Infrastructure Network, WTP 399, World Bank, Washington, D.C., 1998. Kerf, Michael et al.

  Provides a guide to the complex range of issues and options related to design, award, implementation, monitoring, and modification of concessions.

WATER

• Government Opportunism and the Provision of Water in Spilled Water: Institutional Commitment in the Provision of Water Services, edited by William Savedoff and Pablo Spiller. Washington, D.C.: Inter-American Development Bank, 1999, pp. 1-34. Savedoff, William, and Pablo Spiller

  Discusses the causes of leakage, linking the problem with issues of commitment, opportunism, and finances. Describes the political context of water services and determinants of becoming stuck in an equilibrium that provides poor service. Discusses how to overcome these problems and ways of sustaining success.

• Cities Awash: A Synthesis of the Country Cases in Thirsting for Efficiency, edited by Mary M. Shirley. Washington, D.C.: The World Bank, 2002, pp. 1-41. Shirley, Mary M., and Claude Ménard

  Discusses quality issues in the context of yardstick competition, monitoring, performance targets, assignment of risks and rewards, incentives in tariff policies, and the roles of regulatory, judicial, and political institutions.

Key Words

Access pricing, Service quality, Customer value, Incentives