Welfare Effects of Water Pricing in Germany

Christopher Müller

MPRA Paper from University Library of Munich, Germany

Abstract: The observed two-part tariff price structure (consisting of a lump-sum price and a 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; marginal versus average price sensitivity; natural monopoly; public services (search for similar items in EconPapers)
JEL-codes: D61 H42 L32 L95 O25 Q21 (search for similar items in EconPapers)
Date: 2012-09-19
New Economics Papers: this item is included in nep-com and nep-ind
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:41638

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