Quality and shared resources in the Italian network system of water services

In assessing efficiency of water utilities two features are regarded as essential: i) quality and quantity aspects of service provision should jointly contribute to the final outcome; ii) the network type of technology and its related decision making system ought to have a bearing in modelling the way efficiency is evaluated. It is shown how these features can consistently be brought together within a Data Envelopment Analysis model. A key role is played by the endogenous determination of the sharing rule for resources used in common by the production processes. As an example, the model is applied to a sample of Italian companies. The model is relevant both for regulatory decision-making and as support in management and investment decisions.