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Price Rigidity and Quantity Rationing Rules Under Stochastic Water Supply
Author(s) -
Fakhraei S. Hamid,
Narayanan Rangesan,
Hughes Trevor C.
Publication year - 1984
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/wr020i006p00664
Subject(s) - rationing , economics , context (archaeology) , natural resource economics , microeconomics , water supply , environmental science , environmental engineering , paleontology , health care , biology , economic growth
When the quantity of water available falls short of “normal” water supply, the typical response of municipalities is to impose some form of rationing. Although economically efficient measures such as raising prices or issuing transferable ration coupons have been advocated, they are seldom implemented. Yet the economic efficiency implications of rationing have not been analyzed in the context of stochastic supplies. In this paper, two forms of quantity rationing are proposed and the long‐run prices which maximize the expected net benefits are derived with only the knowledge of the demand distribution.