Economies of scale and utilization in the Swiss electric power distribution industry

Abstract

Economies of scale and utilization in the Swiss electricity distribution industry are analysed. A translog variable-cost function was estimated using panel data for a sample of 39 municipal utilities over the period 1988-1991. Economies of both scale and utilization appear to exist in the distribution of electricity, both for small-, medium- and large-sized utilities. Thus, the empirical evidence suggests sub-additivity of the cost function over the relevant range of output for the Swiss electricity distribution utilities, a necessary condition for a natural monopoly to exist.