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Marginal Opportunity Cost Pricing for Municipal Water Supply

Author

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  • Jeremy J. Warford

    (Economy and Environment Program for Southeast Asia (EEPSEA))

Abstract

This paper describes the general rationale for marginal opportunity cost (MOC) pricing, illustrating the concept with special reference to municipal water supply. The various elements of MOC for water, namely marginal production or private cost (MPC); marginal user or depletion cost (MUC); and marginal environmental or external cost (MEC) are described and some numerical examples provided. The relevance of border prices in determining the MOC of tradeable commodities is also considered. The paper then reviews some of the key issues involved in actual implementation of MOC pricing. These include the treatment of externalities, measurement, financial and fiscal, income distributional and second best matters. The paper concludes by listing some possible research topics relating to MOC pricing. While the focus of the paper is on estimation and implementation of MOC as applied to municipal water supply, the approach and techniques employed are of general relevance. Other resources, such as coal and forests are referred to when they provide better illustration of some of the generic issues covered in the paper.

Suggested Citation

  • Jeremy J. Warford, 1994. "Marginal Opportunity Cost Pricing for Municipal Water Supply," EEPSEA Special and Technical Paper sp199401t1, Economy and Environment Program for Southeast Asia (EEPSEA), revised Jan 1994.
    • Handle: RePEc:eep:tpaper:sp199401t1
    as

    Download full text from publisher

    File URL: http://www.eepsea.org/pub/sp/10536146490ACF298.pdf
    File Function: First version, 1994
    Download Restriction: no
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    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Speed blogging
      by noreply@blogger.com (David Zetland) in Aguanomics on 2012-07-05 16:30:00

    Citations

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    Cited by:

    1. Malik Ranasinghe, 1999. "Private sector participation in infrastructure projects: a methodology to analyse viability of BOT," Construction Management and Economics, Taylor & Francis Journals, vol. 17(5), pages 613-623.
    2. Maria Corazon Ebarvia, 1997. "Pricing for Groundwater Use of Industries in Metro Manila, Philippines," EEPSEA Research Report rr1997111, Economy and Environment Program for Southeast Asia (EEPSEA), revised Nov 1997.

    More about this item

    Keywords

    Water supply;

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