Welfare Effects of Water Pricing in Germany
The observed two-part tariff price structure (consisting of a lump-sum price and a linear marginal price) for drinking water in Germany does not reflect the cost structure reported in the literature. Recovering marginal costs from a sample of 251 German counties, we see that there are positive price–cost margins, while lump-sum prices are too low. A price-structure readjustment along welfare-economic principles (marginal cost pricing; lump-sum price ensures cost recovery) would increase the mean consumer surplus by 0.037% of the local GDP or € 2.129 million per county, assuming a share of 15% variable costs in total costs.
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- Johann Wackerbauer, 2003. "Regulierungsmodelle für die öffentliche Wasserversorgung und ihre Wettbewerbseffekte," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 56(21), pages 9-16, November.
- Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680, March.
- Schleich, Joachim & Hillenbrand, Thomas, 2009.
"Determinants of residential water demand in Germany,"
Elsevier, vol. 68(6), pages 1756-1769, April.
- Schleich, Joachim & Hillenbrand, Thomas, 2007. "Determinants of residential water demand in Germany," Working Papers "Sustainability and Innovation" S3/2007, Fraunhofer Institute for Systems and Innovation Research (ISI).
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