Publication Date:
2014-12-21
Description:
In many countries, current water-pricing policies are dictated by the sole objective of financial breaking-even. This results in large withdrawals, which are not sustainable in the long-run, hence not optimal. In this paper, we derive the optimal dynamic pricing policy, which targets efficient distribution while breaking-even through a rebate scheme. Using data from Turkey, we estimate the demand for water by user groups. We carry out simulations to compare the effects of the current and optimal pricing policies on the frequency and severity of shortages. We find that, under the policy of break-even prices, the supplier runs into a shortage every eight years. In contrast, if the prices were to set optimally, shortages would be practically nonexistent over the next century. This article is protected by copyright. All rights reserved.
Print ISSN:
0043-1397
Electronic ISSN:
1944-7973
Topics:
Architecture, Civil Engineering, Surveying
,
Geography
