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Network unbundling and flawed coordination: Experience from the electricity sector

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  • Brunekreeft, Gert

Abstract

What is a good balance between competition and coordination? On the upside, unbundling in network industries promotes competition, but this should be balanced against the downside of unbundling, that is, the cost of coordination. Firm-internal coordination falls away and must be replaced by external market mechanisms. This is a non-trivial task. The cost of flawed coordination resulting from fragmentation can be substantial and policy should focus more on market mechanisms and governance structures to secure better coordination. This paper examines the problem of coordination and discusses with real-world examples why the market faces difficulty in providing effective coordination.

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  • Brunekreeft, Gert, 2015. "Network unbundling and flawed coordination: Experience from the electricity sector," Utilities Policy, Elsevier, vol. 34(C), pages 11-18.
    • Handle: RePEc:eee:juipol:v:34:y:2015:i:c:p:11-18
    DOI: 10.1016/j.jup.2015.03.003
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    More about this item

    Keywords

    Electricity; Networks; Unbundling; Coordination; Incentives;
    All these keywords.

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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