Research Brief

Optimal Water Tariffs for Domestic, Agricultural & Industrial Use

📅 Apr 2024 📄 P026 | Annals of OR ⏱️ 4 min read
Research Brief P026 Annals of OR
AB
Aqu'aBridge Research Team
Apr 2024 · 4 min read

Executive Summary

Key Finding: Linear tariffs (single rate) outperform Increasing Block Tariffs (IBT) for profit maximization under Stackelberg equilibrium (P026, Di Liddo, 2024).

Policy Takeaway: For profit-oriented utilities, use linear tariffs. For sustainability + equity, use IBT.

Research Method

Leader-follower differential game with:

  • Leader: Water supplier (sets prices)
  • Followers: Domestic, agricultural, industrial consumers
  • Goal: Maximize profit + consumer welfare + water sustainability

Results: Linear vs Block Tariffs

Tariff Type Profit Consumer Welfare Water Sustainability
Linear ✅ Higher ✅ Good ⚠️ Lower
Block (IBT) ⚠️ Lower ✅ Higher ✅ Higher
Reference: Di Liddo, A. (2024). Optimal water tariffs for domestic, agricultural and industrial use. Annals of Operations Research, 337:1135-1165. Read Full Paper →

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