An urban water network with storage and uncertain environmental water inflows is modelled. This three period model is analytically tractable, and allows for a straightforward study of the relative economic impact of different policy regimes. The model is used to identify the water authority's first best pricing policy, and its relation to long run marginal cost pricing. The model is then used to identify the implications of adopting the most commonly used rationing method when environmental flows are uncertain: setting a smoothed priced (often LRMC exclusive of scarcity value) and using moral suasion, rather than pricing, to control the demand for water. The optimal manner to address water security is also addressed.

Item Type:	Refereed Article
Keywords:	efficient urban water pricing, moral suasion, environmental uncertainty, storage levels
Research Division:	Economics
Research Group:	Applied Economics
Research Field:	Environment and Resource Economics
Objective Division:	Environment
Objective Group:	Land and Water Management
Objective Field:	Water Allocation and Quantification
UTAS Author:	Sibly, A (Dr Hugh Sibly)
ID Code:	134974
Year Published:	2019
Deposited By:	Economics and Finance
Deposited On:	2019-09-17
Last Modified:	2019-12-16
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