British Gas: Options for Privatisation

The decision to privatize British Gas Corp. (BGC) represents the largest transfer of ownership from the public to the private sector in the UK to date. At present, BGC is characterized by allocative inefficiency in its charging policies. However, improvement depends less on privatization per se than...

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Veröffentlicht in:Fiscal studies 1985-11, Vol.6 (4), p.1-20
Hauptverfasser: HAMMOND, E.M., HELM, D.R., THOMPSON, D.J.
Format: Artikel
Sprache:eng
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Zusammenfassung:The decision to privatize British Gas Corp. (BGC) represents the largest transfer of ownership from the public to the private sector in the UK to date. At present, BGC is characterized by allocative inefficiency in its charging policies. However, improvement depends less on privatization per se than on the structure of the privatized industry. This is best illustrated by comparing 2 alternatives, one that is currently favored by the government, and one that would create a competitive market in the supply of gas. The first approach transfers an existing monopoly to the private sector. In principle, this might reorientate objectives toward profit maximization and improved efficiency. In practice, however, such incentives are likely to prove very weak. The 2nd option attempts to separate out natural monopoly elements of the gas industry from competitive ones. The industry would be divided into 12 independent firms for area distribution. This approach would enhance incentives both in the product market and in the capital market.
ISSN:0143-5671
1475-5890
DOI:10.1111/j.1475-5890.1985.tb00520.x