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Optimal pricing of drinking water based on the average household income using a system dynamics approach

Author

Listed:
  • Maryam Vafaee

    (Bu-Ali Sina University)

  • Hamed Nozari

    (Bu-Ali Sina University)

  • Safar Marofi

    (Bu-Ali Sina University)

Abstract

Proper planning, management of water resources, and improvement and development of management methods of water and sewerage network are essential for sustainable use of available water resources and prevention of economic losses of the Water and Sewerage Company. In this research, the water and sewerage network of Hamedan was simulated using a system dynamics approach. The model’s accuracy in determining the benefit–cost ratio was evaluated. Based on the financial results, for the benefit–cost ratio, the values of root-mean-square error (RMSE), standard error (SE), and determination coefficient (R2) were calculated as 0.01, 0.03, and 0.993, respectively. According to the results, the developed model in this research has high accuracy in simulating the company's financial balance. The optimal drinking water price in different scenarios was determined using the Powell optimization algorithm to improve the economic balance of the Water and Sewerage Company. As long as the per capita consumption of low-income, medium-income, and high-income households is 138, 203, and 268 L/day, respectively, we have no water shortage, and the benefit–cost ratio is improving. The company's financial balance can be increased by determining the optimal drinking water price according to the income of urban households. In addition, the level of social welfare can be increased by increasing the renovation rate of pipes.

Suggested Citation

  • Maryam Vafaee & Hamed Nozari & Safar Marofi, 2025. "Optimal pricing of drinking water based on the average household income using a system dynamics approach," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 27(6), pages 14985-15004, June.
    • Handle: RePEc:spr:endesu:v:27:y:2025:i:6:d:10.1007_s10668-023-04438-9
    DOI: 10.1007/s10668-023-04438-9
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