The welfare economics of optional water metering with asymmetric information.
The paper develops a model of decentralized metering decisions when selective metering is socially optimal. Households choose between two-part tariffs. Decentralization achieves social efficiency when the regulator, who knows household characteristics, gives householdspecific compensation (via a red...
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| Format: | Working paper |
| Language: | English |
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Department of Economics (University of Oxford)
2006
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| _version_ | 1797088283106213888 |
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| author | Cowan, S |
| author_facet | Cowan, S |
| author_sort | Cowan, S |
| collection | OXFORD |
| description | The paper develops a model of decentralized metering decisions when selective metering is socially optimal. Households choose between two-part tariffs. Decentralization achieves social efficiency when the regulator, who knows household characteristics, gives householdspecific compensation (via a reduction in the lump-sum charge on choosing to have a meter), while allowing for the cost of metering. Relative to the status quo of no metering the full-information scheme provides a Pareto improvement. With asymmetric information the firstbest allocation of meters can be achieved when only small consumers should have meters. When large consumers alone should be metered it is not possible to separate customers. An exogenous signal that is highly correlated with the unknown type can, however, help to alleviate this problem. The policy of requiring meters to be provided free is problematic because the first-best allocation does not enable all the water supplier’s costs to be recovered. |
| first_indexed | 2024-03-07T02:47:46Z |
| format | Working paper |
| id | oxford-uuid:ac9d3d43-ff0e-4fd5-ba0b-a1c217622e8e |
| institution | University of Oxford |
| language | English |
| last_indexed | 2024-03-07T02:47:46Z |
| publishDate | 2006 |
| publisher | Department of Economics (University of Oxford) |
| record_format | dspace |
| spelling | oxford-uuid:ac9d3d43-ff0e-4fd5-ba0b-a1c217622e8e2022-03-27T03:30:06ZThe welfare economics of optional water metering with asymmetric information.Working paperhttp://purl.org/coar/resource_type/c_8042uuid:ac9d3d43-ff0e-4fd5-ba0b-a1c217622e8eEnglishOxford University Research Archive - ValetDepartment of Economics (University of Oxford)2006Cowan, SThe paper develops a model of decentralized metering decisions when selective metering is socially optimal. Households choose between two-part tariffs. Decentralization achieves social efficiency when the regulator, who knows household characteristics, gives householdspecific compensation (via a reduction in the lump-sum charge on choosing to have a meter), while allowing for the cost of metering. Relative to the status quo of no metering the full-information scheme provides a Pareto improvement. With asymmetric information the firstbest allocation of meters can be achieved when only small consumers should have meters. When large consumers alone should be metered it is not possible to separate customers. An exogenous signal that is highly correlated with the unknown type can, however, help to alleviate this problem. The policy of requiring meters to be provided free is problematic because the first-best allocation does not enable all the water supplier’s costs to be recovered. |
| spellingShingle | Cowan, S The welfare economics of optional water metering with asymmetric information. |
| title | The welfare economics of optional water metering with asymmetric information. |
| title_full | The welfare economics of optional water metering with asymmetric information. |
| title_fullStr | The welfare economics of optional water metering with asymmetric information. |
| title_full_unstemmed | The welfare economics of optional water metering with asymmetric information. |
| title_short | The welfare economics of optional water metering with asymmetric information. |
| title_sort | welfare economics of optional water metering with asymmetric information |
| work_keys_str_mv | AT cowans thewelfareeconomicsofoptionalwatermeteringwithasymmetricinformation AT cowans welfareeconomicsofoptionalwatermeteringwithasymmetricinformation |