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Australian Agricultural and Resource Economics Society >
2008 Conference (52nd), February 5-8, 2008, Canberra, Australia >
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http://purl.umn.edu/6005
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| Title: | Urban water management: optimal price and investment policy under uncertainty |
| Authors: | Hughes, Neal
Hafi, Ahmed
Goesch, Tim
Brownlowe, Nathan |
| Authors (Email): | Hughes, Neal (Neal.Hughes@abare.gov.au) |
| Issue Date: | 2008 |
| Series/Report no.: | Conference Paper |
| Abstract: | Australian urban water utilities face a significant challenge in designing
appropriate demand management and supply augmentation policies in the
presence of increasing water scarcity and uncertainty over future dam inflows.
This paper considers the design of optimal demand management and supply
augmentation policies for urban water. In particular, scarcity pricing is considered
as a potential alternative to the predominant demand management policy of water
restrictions.
A stochastic dynamic programming model of an urban water market is developed
based on data from the Australian Capital Territory. The model involves an explicit
consideration of uncertainty via a probability distribution over dam inflows. Given
a specification of the demand and supply for urban water, state dependent optimal
price and investment policies are estimated. The results illustrate how the optimal
urban water price varies inversely with the prevailing storage level and how the
optimal timing of investment differs significantly between rain dependent and rain
independent augmentation options. |
| URI: | http://purl.umn.edu/6005 |
| Institution/Association: | Australian Agricultural and Resource Economics Society - 2008>2008 Conference (52nd), February 5-8, 2008, Canberra, Australia |
| Total Pages: | 24 |
| Collections: | 2008 Conference (52nd), February 5-8, 2008, Canberra, Australia
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| cp08hu03.pdf | | 383Kb | PDF | View/Open |
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