1. Water Prices and Other Inefficiencies in Water Markets
Monday, March 28

2. How are water users charged?
Flat fee pricing
Total cost of 100 gallons is the same as total cost of 10 gallons
Flat rate pricing
Priced on a per unit basis; 100th unit costs the same as the 10th unit
Average cost pricing
Total operating costs divided by number of units used (e.g. cost per gallon)

3. How are water users charged?
Declining block pricing
High marginal price for first units (block) of water units used
Subsequent units (blocks) are less expensive
Increasing block pricing
Subsequent “blocks” of water consumed beyond an initial quantity are priced at increasingly higher levels

4. What is efficient pricing?
Marginal cost pricing
Consumers pay a price equal to the marginal cost of supplying the water $ MC P
Profit MB
water Q

5. Water: public or private good?
Open access
Ground water in Texas
Exclusivity and Enforceability
“Reasonable use” doctrine in Michigan
Transferability: Ability to transfer use rights to highest value use
Privatization