Measuring the Dynamic Efficiency Costs of Regulators' Preferences: Municipal Water Utilities in the Arid West
Evidence suggests that municipal water utility administrators in the western US price water significantly below its marginal cost and, in so doing, inefficiently exploit aquifer stocks and induce social surplus losses. This paper empirically identifies the objective function of those managers, measures the deadweight losses resulting from their price-discounting decisions, and recovers the efficient water pricing policy function from counterfactual experiments. In doing so, the estimation uses a "continuous-but-constrained- control" version of a nested fixed-point algorithm in order to measure the important intertemporal consequences of groundwater pricing decisions. Copyright The Econometric Society 2002.
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Volume (Year): 70 (2002)
Issue (Month): 2 (March)
Pages: 603-629
| Handle: | RePEc:ecm:emetrp:v:70:y:2002:i:2:p:603-629 |
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References listed on IDEAS
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- Christopher Timmins, 2003. "Demand-Side Technology Standards Under Inefficient Pricing Regimes," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 26(1), pages 107-124, September.
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Discussion Papers
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- Rust, J., 1991. "Estimation of dynamic Structural Models: Problems and Prospects Part I : Discrete Decision Processes," Working papers 9106, Wisconsin Madison - Social Systems.
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- Oscar R. Burt, 1964. "Optimal Resource Use Over Time with an Application to Ground Water," Management Science, INFORMS, vol. 11(1), pages 80-93, September.
- Feigenbaum, Susan & Teeples, Ronald, 1983. "Public versus Private Water Delivery: A Hedonic Cost Approach," The Review of Economics and Statistics, MIT Press, vol. 65(4), pages 672-78, November.
- Renzetti, Steven, 1992. "Evaluating the welfare effects of reforming municipal water prices," Journal of Environmental Economics and Management, Elsevier, vol. 22(2), pages 147-163, March.
- Peltzman, Sam, 1971. "Pricing in Public and Private Enterprises: Electric Utilities in the United States," Journal of Law and Economics, University of Chicago Press, vol. 14(1), pages 109-47, April.
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