| Abstract: | ABSTRACT The long-term effects of presently used and alternatively proposed water pricing policies were studied using some tools of operations research and economics. A discrete deterministic dynamic programming model was structured and operated to determine the optimal water supply capacity expansion paths for a hypothetical residential community with a given water pricing policy. The objective of the model was the maximization of future discounted consumers'surpluses plus producer's revenues net of the long-run cost of supply. State variables were the size of system capacity in MGD and stage variables were the times of feasible capacity increase in years. Demand curves, population sizes, and growth rates for various economic sectors of the community were assumed known, as well as short-run production and capital construction costs. Several policies, including constant unit rates, decreasing or increasing block rates and summer differential rates were tested. It was concluded that price plays a major role in the short-run allocation and long-run planning and conservation of water supplies. Conservational pricing policies were advocated as means of lowering the long-run cost of water, using the water price-demand function as a planning tool. Further research in these areas was recommended. |
