Please use this identifier to cite or link to this item:
http://hdl.handle.net/10071/505
Author(s): | Monteiro, H. |
Date: | 2005 |
Title: | Water pricing models: a survey |
Collection title and number: | Dinâmia Working Paper 2005/45 |
Keywords: | Water pricing models Capacity constraints Scarcity Revenue requirements Second-best pricing Block rate pricing |
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. |
Peerreviewed: | Sim |
Access type: | Open Access |
Appears in Collections: | DINÂMIA'CET-WP - Working papers com arbitragem científica |
Files in This Item:
File | Description | Size | Format | |
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DINAMIA_WP_2005-45.pdf | 117,12 kB | Adobe PDF | View/Open |
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