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http://hdl.handle.net/10071/505
acessibilidade
Title: Water pricing models: a survey
Authors: Monteiro, H.
Keywords: Water pricing models
Capacity constraints
Scarcity
Revenue requirements
Second-best pricing
Block rate pricing
Issue Date: 2005
Publisher: Dinâmia
Series/Report no.: Dinâmia Working Paper
2005/45
Abstract: This paper surveys water pricing models, highlighting some important results. Efficiency requires 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.
Description: JEL Classification: L95, Q25.
Peer reviewed: Sim
URI: http://hdl.handle.net/10071/505
Appears in Collections:DINÂMIA'CET-WP - Working papers com arbitragem científica

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