The Role of Pricing in Managing the Demand for Water

Abstract

Pricing will efficiently and effectively manage the demand for water. Marginal cost pricing which requires consumers to pay the costs of servicing them finds an ideal application in peak period pricing. Charging those responsible for the system capacity necessary to fulfill their peak demands is both efficient and equitable. Estimates of the price elasticity of demand for water and case studies both show that price increases will reduce the demand for water.