Optimal Water Metering and Pricing

Andrés Chambouleyron ()

Industrial Organization from University Library of Munich, Germany

Abstract: Marginal cost pricing of running water and sewerage services has long been the default recommendation of economists and natural resource specialists to firms and local governments. However, water pricing has never been studied simultaneously with the water metering problem before. The socially optimal number of meters crucially depends on the price of water charged by the Water Company because depending on this will be the fall in consumption and therefore in water production costs and vice versa. This paper breaks the inertia as it combines both issues in one optimization problem. Both in a centralized and in a decentralized way, the optimal number of meters is determined simultaneously with the optimal per unit water rate. The Rateable Value System (RV) (i.e. the “Status Quo” or benchmark regime) is confronted with Universal Metering (UM), Optimal Metering (OM) and Decentralized Metering (DM) in terms of optimal water rates and the socially optimal number of meters. Except for RV, the results of (UM), (OM) and (DM) all recommend setting price equal to marginal cost and the optimal number of meters is hereby endogenously determined by a functional form relating water and metering costs and water demand characteristics. Conclusions and policy recommendations are drawn from the theoretical analysis.

Keywords: water metering; water pricing (search for similar items in EconPapers)
JEL-codes: L95 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2003-01-28
New Economics Papers: this item is included in nep-com, nep-ind and nep-res
Note: Type of Document - Tex/WordPerfect/Handwritten; prepared on IBM PC - PC-TEX/UNIX Sparc TeX; to print on HP/PostScript/Franciscan monk; pages: 19 ; figures: included/request from author/draw your own
References: View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://econwpa.ub.uni-muenchen.de/econ-wp/io/papers/0301/0301013.pdf (application/pdf)

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:wpa:wuwpio:0301013

Access Statistics for this paper

More papers in Industrial Organization from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA ( this e-mail address is bad, please contact ).