The welfare economics of optional water metering with asymmetric information

Simon Cowan

No 273, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: The paper develops a model of decentralized metering decisions when selective metering is socially optimal. Households choose between two-part tariffs. Decentralization achieves social efficiency when the regulator, who knows household characteristics, gives household-specific compensation (via a reduction in the lump-sum charge on choosing to have a meter), while allowing for the cost of metering. Relative to the status quo of no metering the full-information scheme provides a Pareto improvement. With asymmetric information the first-best allocation of meters can be achieved when only small consumers should have meters. When large consumers alone should be metered it is not possible to separate customers. An exogenous signal that is highly correlated with the unknown type can, however, help to alleviate this problem. The policy of requiring meters to be provided free is problematic because the first-best allocation does not enable all the water supplier`s costs to be recovered.

Keywords: Water Metering; Optional; Two-part Tariffs; Asymmetric Information (search for similar items in EconPapers)
JEL-codes: D82 L51 Q25 (search for similar items in EconPapers)
Date: 2006-08-01
New Economics Papers: this item is included in nep-agr and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://ora.ox.ac.uk/objects/uuid:c116e80c-88b1-4791-9923-2d7ab145ee6d (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oxf:wpaper:273

Access Statistics for this paper

More papers in Economics Series Working Papers from University of Oxford, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Anne Pouliquen ( this e-mail address is bad, please contact ).