Infrastructure and Utility Economics – color paperback

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Paperback: 452 pages

Publisher: Professional Economics Ltd Review 2nd edition 10 July 2017

Language: English

ISBN- 13: 978-0957699014

Product dimensions: 23.4 x 15.6 x 2.5 cm


About the author

Mark Hull (Author)

Following a career as a government economist, corporate strategist and manufacturing company CEO, Mark Hull worked as a private sector utilities economist for 13 years. During this time he worked for some of the world’s top private consultancies offering analyses and advice in the water, electricity, gas and rail industries on strategic, regulatory, cost-cutting, merger and restructuring issues in the UK, continental Europe, North America, South America, and Asia. He now teaches economics and business strategy in Universities and Business Schools.

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SKU: I&UE 2nd edn. printed Category:


This book explains infrastructure and utility economics as the economics of sunk costs. It examines closely the dynamic sequence of investor and management decisions that determines the evolution of market structures in industries with significant sunk costs, such as electricity, gas, water, wastewater, rail, roads and broadband telecoms. These industries are natural monopolies, but utility economists have known for decades that the textbook explanation (high fixed costs) is wrong. This textbook is the first to propose a coherent general alternative theory based on a sequential model of sunk costs as an asymmetry in time. 40 years after Baumol and co. first introduced the concept of contestable markets to theoretical economics, we at last have a general dynamic model of the evolution of a natural monopoly.

The second edition of this seminal text, formerly known as Basic Network Utility Economics, discusses alternative definitions of sunk costs, and then defines them properly – as asymmetries in technology, time or space. It then develops a simple general sequence model to explain exactly how geographically and technologically unique sunk costs create massive entry barriers (Chapter 3) – the general model of the economics of sunk costs. Using simplified systems models it explores the circumstances under which second and subsequent entries can rationally occur, leading to a theory which accurately predicts why electricity, gas, water, wastewater and rail are nearly always monopolies, but broadband landlines, bus companies and postal services may be oligopolies, duopolies or monopolies. The general theory handles technological and market change very simply, dispensing with all notions of fixed revenue and cost curves, and is generally applicable to any industry in any circumstance – e.g. the automobile, or aircraft-making, or mobile phone industries – but gives the clearest results where sunk costs are significant (as in all three of those industries – Chapter 4).

Having introduced students to infrastructure economics and the basics of the utility industries (Chapter 1), and to the general theories of utility evolution, the book explains the techniques that are actually used by practitioners to analyse and advise policymakers, in simple language suitable for anyone with an understanding of basic economics. It explains how to calculate forward-looking long run marginal costs in a time-series sense, how to measure network outputs properly, and how to compare the efficiency of different networks in the same industry fairly (not as obvious as one might think). In the course of this “easy and informative” exposition the limitations of neoclassical models are exposed, and more general tools are gently explained, using 148 colour diagrams and a minimum of algebra.

This is the only textbook to explain the basic stages of infrastructure economics and of each heavy utility (the value chains and the nature of energy demand, water demand, wastewater demand and transport demand), define sunk costs properly, propose a coherent general theory of the economics of sunk costs to explain all market structures, and then use this theory a) to develop standard professional utility economist techniques such as measuring the long run marginal costs of utilities, determining utility outputs and techniques for measuring the efficiency of individual utilities, and b) to apply this theory to recent global examples where utilities around the world have been restructured and often privatised.

The full contents of the book are described in the Contents pdf file which can be downloaded immediately. Individual chapters are also available for downloading electronically as .epub (iBooks etc.) or .mobi (Kindle etc.) formats. Chapters 14 explaining all the general basic concepts are FREE, while Chapters 5-13 range in price from £4 to £12 or about $5 to $15. The e-book version of this is available in epub and mobi formats at a price of £35 or $45.

Publication date: 10 July 2017¦ ISBN-13: 978-0-9576990-1-4 ¦Edition: Second

Additional information

Weight 1.7 GBP
Dimensions 23.4 x 2.5 x 15.6 cm

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Discuss: “Infrastructure and Utility Economics – color paperback”

  1. September 22, 2017 at 19:15 #

    “[The second edition of this book] …appears to be a textbook but really it is a treatise. I have never seen anything quite as novel and far-reaching as this, applied to utilities. The ideas are based on a quite remarkable range of knowledge and references in economics, and the combination of economic analysis and practical experience is both unusual and impressive. The notion of basing the analysis of the utility sector on the economics of sunk cost is remarkably original – as far as I know, no one else has suggested this, much less analysed it with the rigour and imagination and practical knowledge that you have. I don’t know whether other teachers of utility economics would be able to use the material in your book as effectively as you are able to, but certainly they ought to ponder on the ideas and lessons that you provide.”
    Written comment to the author by Professor Stephen Littlechild, inventor of the RPI-X price cap method of regulation, Fellow of the Judge Business School, University of Cambridge, Emeritus Professor of Economics at University of Birmingham, and former Director General of Electricity Supply (chief economic regulator of the UK electricity industry) 1989-98

    Posted by mark
  2. September 22, 2017 at 19:38 #

    “I have much enjoyed reading your Chapter 4. I find it a very helpful dynamic model which both takes further the idea of contestability and links it to the dynamics of technical change.
    “There is an interesting 2-way relationship: the degree of contestability will depend on the nature of the technical change, and the technical change will have its own degree of contestability. Very neat.”
    Letter to the author from Sir Ian Byatt, Director General of Water Services (economic regulator of the English and Welsh water industry) 1989-2000, former Deputy Chief Economic Adviser to the Treasury

    Posted by mark

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