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- Title
Resource management and the mayor's guarantee in French water allocation
- Authors
Clark, Ephraim; Mondello, Gerard
- Abstract
This paper uses standard methods in stochastic calculus to measure the cost of the agency conflict that pits elected officials of French municipalities against the communities they represent in the management of the water supply. Under the French legal code, the municipalities are responsible for the water supply and the elected officials arepersonally liable for any damage due to negligence on their part. Uncertainty regarding exactly how negligence will be defined by the courts puts the elected officials in a precarious position. By delegating authority to an oligopoly of private firms, however, elected officials can eliminate their personal liability, which is transferred to the delegated firm. Many studies argue that delegation locks communities into long-term contracts that are against their better interests. Thus, the agency conflict may affect the delegation decision to the detriment of the community. To determine whether or not this is true it is necessary to know the economic cost of the mayor's personal liability.
- Subjects
FRANCE; ECONOMICS; INSURANCE; MATHEMATICAL analysis; RESOURCE allocation
- Publication
Environmental & Resource Economics, 2000, Vol 15, Issue 2, p103
- ISSN
0924-6460
- Publication type
Article
- DOI
10.1023/A:1008326220811