Technical Efficiency under Alternative Regulatory Regimes: Evidence from the Inter-war British Gas Industry

From 1920 until nationalization, privately owned gas companies in Britain were regulated under one of three systems: the maximum price, the sliding scale, or the basic price system. In effect, the industry was the subject of a remarkable experiment in regulation. Hitherto, there has been no empirical analysis of the incentive properties of the regimes applied. This paper attempts such an investigation by using data envelopment analysis to estimate the relative efficiency of a sample of undertakings under each system. Undertakings operating under the basic price system are found to be more efficient which suggests that this form of regulation was most effective in the industry at this time.