CEU Electronic Theses and Dissertations, 2010
| Author | Bisztray, Márta |
|---|---|
| Title | Pricing in Public Water Supply |
| Summary | The sector of public water supply gains more and more attention these days. The presence of exhaustible aquifers and the declining state of infrastructure are frequently mentioned reasons why current pricing practices should be reconsidered. However, welfare effects of a price change can only be evaluated by anticipating demand side adjustments. In my thesis I focus on the estimation of price elasticity concerning public water supply for residential customers. Estimations are done based on a panel database of about 700 firms from 21 countries of Central- and South-Eastern Europe and the post-Soviet region, using the method of first differences. Water demand is found to be inelastic with an elasticity value of -0.099. I also provide estimates regarding elasticity of variable costs with respect to output. Using a Cobb-Douglas specification increasing returns to scale is found. Finally I give a numerical example in order to illustrate how these estimates can be used for evaluating welfare effect of price changes. For this purpose I propose a dynamic model which also takes into consideration the effect of investments into infrastructural quality. |
| Supervisor | Kézdi, Gábor |
| Department | Economics MA |
| Full text | https://www.etd.ceu.edu/2010/bisztray_marta.pdf |
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