Many economic studies have addressed the issue of inefficiency of public water supply in rural areas and the potential for improved service by private companies. Many of these analyses focused on identifying either willingness to pay or comparing average service costs and prices paid by customers. This paper performs a welfare analysis of two water supply systemspublic and self owned-in rural Tunisia. The paper calculates consumer and producer surplus and compares the performance of the two systems from a social point of view. Results suggest that both systems are inefficient, mainly because of a production level that is low compared with production capacity. © 2002 Elsevier Science B. V. All rights reserved.