The paper deals with regulation authorities/agencies and local monopolies. The framework of the analysis can be useful, in general, for franchising/contracting-out relationships between local governments and firms. The core thesis of the paper is that the effectiveness of local regulatory authorities is significantly weakened, a part from information asymmetries largely treated in literature, by several factor. Some of these are external to the authority, like the incumbent’s proximity to the local market and socio-political environment; some influence the authority behaviour, like the improper costs due to inertia and osmosis between professional statuses with interest’s conflict. These factors are also present in the regulation process at national level, yet they seem more incisive when the geographical dimension of the regulated markets shrinks. Besides, there are interesting analogies with the auditing and rating sectors.
Corrective policies may consist in spreading the culture of regulation at local level, enlarging the spatial competence of the authorities/agencies,