Internal Regulation by Mixed Enterprises – the case of the Italian water sector

This paper aims at proposing an economic analysis of mixed enterprises in local utilities. We suggest that the public service concession to mixed enterprises could embody a noteworthy substitute to the traditional public provision and the concession to totally private enterprises. The starting point of the entire analysis is that ownership allows the (public) owner to gather more information about the actual management of the firm, according to property rights theory. Following it, we conclude that under certain conditions mixed enterprises could significantly reduce asymmetric information between regulators and regulated firms by implementing a sort of ‘internal’ regulation. With more information, the public authority can stimulate the private operator to be more efficient and can monitor it more effectively with respect to the fulfilment of contractual obligations. Moreover, concerning the latter function, the board of directors of these enterprises can be the suitable place where public and private representatives can meet to solve all disputes arising from incomplete contracts.