Economies of Scale in City Gas Sector in Seoul, South Korea: Evidence from an Empirical Investigation

The city gas sector in Seoul, the capital of South Korea, consists five locally monopolized companies. As penetration reaches 98% and as cooking fuel heating is being converted to electricity district system, respectively, need redefine role raised. In this respect, study aims analyze economies scale using translog variable cost function model over period 2008–2020 compute minimum efficient scale. economy index ranged from 0.1 0.2, which was larger than 1.0. results show that still enjoys scale, although are gradually disappearing. efficiency estimated be 1.06 times size total market, output This finding vividly suggests reducing number companies through mergers acquisitions among more desirable terms reduction. business structure favorable business, such high population density urbanization, can rapidly lose under rapid electrification a rigid wholesale market. central local governments, have authority regulate promote between operators, normalize distorted energy rates order prevent excessive electrification.