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Abstract: In 1995, the President of Chile proposed to the legislature several reforms designed to strengthen the agency that regulated the tariffs charged by Chile's water companies. Although a half dozen water companies were private, most of the water systems were still in public hands. The government wanted to reform the regulatory agency before it privatized the rest of the companies.
Learning Objective: This case raises various issues in the design of regulatory agencies, including how to balance independence with accountability, the information the regulator needs to set prices, and strategies for gathering that information.