Welfare Effects of Water Pricing in Germany

Christopher Müller

Water Economics and Policy (WEP), 2015, vol. 01, issue 04, 1-25

Abstract: The observed two-part tariff price structure (consisting of a lump-sum price and linear marginal price) for drinking water in Germany does not reflect the cost structure reported in the literature. Recovering marginal costs from a sample of 251 German counties, we see that there are positive price-cost margins, while lump-sum prices are too low. A price structure readjustment along welfare economic principles (marginal cost pricing, lump-sum price ensures cost-recovery) would increase the mean consumer surplus by 0.037% of the local GDP or €2.129 million per county, assuming a share of 15% variable costs in total costs.

Keywords: Residential water demand; welfare measurement; public water supply; equity-efficiency trade-off; natural monopoly; public services (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (2)

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Working Paper: Welfare Effects of Water Pricing in Germany (2012)
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DOI: 10.1142/S2382624X15500198

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