Water Pricing Models: a survey
Henrique Monteiro ()
Others from EconWPA
This paper surveys water pricing models, highlighting some important results. Efficiency rquires marginal cost pricing. Intra-annual price changes or customer differentiation to reflect differences in marginal costs can enhance efficiency. A marginal cost pricing mechanism may signal the value that consumers attribute to further capacity expansions as the water supply system approaches its capacity limit and marginal cost rises. However, pure marginal cost pricing may not be feasible while respecting a revenue requirement because marginal costs may be higher or lower than average costs. The most common ways of combining efficiency and revenue requirements are through the use of two-part tariffs, adjusting the fixed charge to meet the revenue requirement, or through second-best pricing like Ramsey pricing. It is not evident whether the best scheme is a two-part tariff or some other pricing mechanism. The role of block rate pricing, increasingly more frequent in actual pricing practices, is yet to be fully investigated.
Keywords: water pricing models; capacity constraints; scarcity; revenue requirements; second-best pricing; block rate pricing (search for similar items in EconPapers)
JEL-codes: L95 Q25 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-agr and nep-mic
Note: Type of Document - pdf; pages: 16. DINÂMIA - Research Centre for Socioeconomic Change Working Paper n. 45
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (5) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpot:0510002
Access Statistics for this paper
More papers in Others from EconWPA
Bibliographic data for series maintained by EconWPA ().