Three criteria are established for the evaluation of the utility of multiobjective programing techniques for water resource planning. The criteria are computational efficiency, explicitness of trade offs among objectives, and the amount of information generated for decision making. The multiobjective approaches are classified into generating techniques, techniques which rely on the prior articulation of preferences, and techniques which foster iterative definition of preferences. The methods in the various classes are reviewed and evaluated in terms of the hypothesized criteria. The evaluations are then used in establishing conclusions about the applicability of the multiobjective approaches to water resource problems.

A review and evaluation of multiobjective programing techniques

Instrumental estimates of two price specifications, one motivated by the consumer decision problem given full information about rates and charges and the other an average price formulation, are developed to correct for measurement error when residential water sales are made at a schedule of rates, rather than at uniform prices. Annual water purchases of single-family residences are regressed on these instrumental price estimates, family income, and household size by ordinary least squares, based on a sample of 326 observations from metropolitan Denver, Colorado, for 1976. The resulting demand estimates are robust to the price concept specified, given proportional variation in all rates and charges, and are consistent with findings in the literature. The overall price elasticity estimates range between −0.14 in a linear model to −0.44 in a log-log model, while the estimated income elasticity varies between 0.40 and 0.55.

Instrumental Price Estimates and Residential Water Demand

Publisher Summary This chapter reviews the application of economic concepts to study the consumption, supply, and allocation of water resources. Water management poses a wide array of issues for economists because few commodities are so pervasively involved in human economic activities. To an important degree, the location and intensity of economic activities depend on the availability of water for drinking, for agricultural and industrial production, for sanitation and waste assimilation, for transportation, and for aesthetic and recreational benefits. Water is said to be the only substance that exists in all three physical states—solid, liquid, and gas—within the normal temperature range found on the earth's surface. Through the process known as the hydrologic cycle, the earth's water inventory is continually being transformed among the three states. No form of life on the earth can exist without water. Water is a universal solvent. The chapter reviews those characteristics of water resource systems that serve to set them apart from other resources, with particular reference to the attributes that serve as the basis for public intervention. It also describes the nature of interventions that have been made and emphasizes the need for evaluating them in terms of their objectives.

Chapter 11 Economics of water resources: a survey

There have been inconsistencies in past residential water demand studies concerning the specification of the relevant price variable. Both average and marginal price have been used. Households faced with the decision to expand (or contract) their water consumption are responsive to the additional cost (or savings) involved with this decision. The appropriate measure of this price is marginal price, not average price. Data were gathered from a large metropolitan area, Miami, Florida, to illustrate the divergence in estimation from two demand models, identically specified, except for the price variable. One utilized marginal price, the other average price. Predictions of consumption varied from 22 to 107% between the two models. The average price model significantly overestimated the response of consumption to price and income changes, a result worthy of consideration.

Price variable in residential water demand models

(1986). The demand for urban water by customer class. Applied Economics: Vol. 18, No. 12, pp. 1275-1289.

The demand for urban water by customer class

Demand management through pricing is assessed as a means to control use and influence investment in water resources. In the assessment of various pricing policies, trade offs are considered: economic efficiency, investment information, administrative and transaction costs, equity, and political acceptability. On the basis of these trade offs, eight water resource areas are evaluated for their potential for improved pricing. Four areas in water resources show promise for using improved pricing policies: municipal water services, industrial and municipal sewerage, navigation, and flood damage reduction and shoreline protection. Four other areas for various reasons present serious problems: outdoor recreation, fish and wildlife habitat, irrigation, and hydroelectric power.

Potential for marginal cost pricing in water resource management

SINCE water the needs turn of of metropolitan the century, areas the water needs of metropolitan ar as have been met through the construction of increasingly large and complex supply facilities. At present, there are no signs that this expansionist trend will be reversed or even dampened. In the West, more than one plan for transferring water between river basins has been proposed in recent years, and several of these have transcontinental dimensions.1 The northeastern United States has experienced a drought of major proportions in the past decade, an experience that has resulted in much concern and that could produce proposals for premature expenditures to insure future water supply.2 Both absolute and relative costs associated with these facilities and proposals have been rapidly increasing, and will continue to increase.3 A major cause of increasing costs is the fact that streamflows are negatively correlated with seasonal demands. Hence, additional over-the-season storage is needed as water demands increase.

https://www.jstor.org/stable/info/41266446

Demand management through responsive pricing

http://science.sciencemag.org/content/sci/181/4101/723.full.pdf

Evaluating Federal Water Projects: A Critique of Proposed Standards.

In this paper, we discuss how user fees and congestion tolls can be used to improve the efficiency and equity with which the inland waterway system is managed. The advantages and disadvantages of various types of user fees (fuel taxes, segment tolls, and license fees) are presented. The rationale for the employment of congestion tolls on congested waterways is discussed. A segment toll that is equated to average variable cost is recommended for uncongested existing waterwyas. When existing waterways are congested, congestion tolls, in addition to the segment tolls, are recommended, A two-part tariff, consisting of segment tolls and an annual license fee, is recommended for “new” uncongested waterways. A three-part tariff, consisting of the first two parts plus congestion tolls, is recommended for “new” congested waterways.

The Role of User Fees and Congestion Tolls in the Management of Inland Waterways

A computer simulation of the Potomac River basin system run under conditions projected for the year 2010 has been used to test the performance of three water supply systems proposed for the Washington, D.C., metropolitan area. Two of the systems offered additional storage capacity on the Potomac River. These systems were found to meet average daily water withdrawal requirements. A third system, the minimum storage plan, offered no new storage capacity but was found feasible if used in conjunction with pumping from the Potomac River estuary and/or accepting drought adjustment. The minimum storage plan was the least costly system in real terms. However, the most costly reservoir systems are favored by local water planners, because most of the reservoir costs would be shared by the federal government. Although the real costs of the minimum storage plan are less than those of the reservoir plans, it is not favored, because none of the costs are borne by the federal government. This study illustrates the inefficiencies that can be generated by current cost-sharing policies.

Robert K. Davis

Papers

Potential for marginal cost pricing in water resource management

Demand management through responsive pricing

Evaluating Federal Water Projects: A Critique of Proposed Standards.

The Role of User Fees and Congestion Tolls in the Management of Inland Waterways

Conventional and unconventional alternatives for water supply management