Abstract

Public monopolies in public utilities have been dismantled in many OECD countries over the last two decades. When public authorities were not in the position to replace them with a proper market competition, they have often implemented the competition for the market model. In this model, firms compete to win the auction and to acquire a legal monopoly (total or local) for a given period of time. This article argues that there are some significant costs associated to the periodic replacement of a supplier with another one and these costs are defined as transition costs. Public authorities should be aware of them since there are several policies which can reduce the risks and costs associated to competition for the market in public utilities.