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JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org.. The Board of Regents of the University of Wisconsin System and University of Wisconsin Press are collaborating with JSTOR to digitize, preserve and extend access to Land Economics.ABSTRACT. The behavior of privately and publicly owned water utilities is examined by estimating a generalized variable cost function containing the regular characteristics of the neoclassical cost function without requiring that cost minimization subject to market prices be imposed as a maintained hypothesis. Assuming that unobserved shadow prices reflect the regulatory environment of the water industry, tests for cost minimization are obtained by deriving shadow prices as functions of market prices. The empirical results provide evidence that public water utilities are more efficient than private utilities on average, but are more widely dispersed between best and worst practice. (JEL L33)

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