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Pricing for water conservation with cost recovery
Author(s) -
Loehman Edna Tusak
Publication year - 2008
Publication title -
water resources research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.863
H-Index - 217
eISSN - 1944-7973
pISSN - 0043-1397
DOI - 10.1029/2008wr006866
Subject(s) - incentive , variable (mathematics) , unit (ring theory) , unit price , marginal cost , average cost pricing , block (permutation group theory) , water pricing , set (abstract data type) , computer science , environmental economics , mathematical optimization , economics , water conservation , cost accounting , microeconomics , water resources , target costing , mathematics , mathematical analysis , mathematics education , accounting , geometry , biology , programming language , ecology
Variable unit pricing provides incentives for conservation, similar to increasing block rates, while covering system costs. For supply‐limited situations and planning contexts, it is also shown to provide for cost recovery with supply limits and capacity constraints. This paper presents two applications of pricing with supply constraints: (1) an application for Amman, Jordan, showing that VUP satisfying a supply limit can avoid more costly capacity expansion and (2) an example of seasonal pricing for Boulder, Colorado, as an alternative to water restrictions. These two cases also exhibit two methods for generating data needs: (1) a “full information approach” with specified demand and cost functions and (2) “iterative pricing” that uses a previous year's cost and consumption data to set future pricing.