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Article

Pricing Strategy for Residential Water in Drought Years. Application to the City of Tianjin, China

1
School of Hydraulic Engineering, Dalian University of Technology, Dalian 116024, China
2
Centre for Water Systems, College of Engineering, Mathematics and Physical Sciences, University of Exeter, North Park Road, Harrison Building, Exeter EX4 4QF, UK
3
Design Institute of Civil Engineering & Architecture of Dalian University of Technology Co., LTD., Dalian 116024, China
*
Author to whom correspondence should be addressed.
Academic Editor: Ana Iglesias
Water 2021, 13(8), 1073; https://doi.org/10.3390/w13081073
Received: 12 March 2021 / Revised: 8 April 2021 / Accepted: 12 April 2021 / Published: 13 April 2021
In drought years, most residents fail to improve water use efficiency due to residential water supply normally being prioritized in many regions, which makes other low-priority industrial water users suffer more from water shortage. This paper proposes a Pricing Strategy for Residential Water (PSRW), a water tariff that changes on annual time scale, based on the scarcity value of water resources, aiming to promote residential water conservation and reallocate water resources across the residential and industrial sectors during droughts. An optimization model to maximize the total benefit of residents and industrial sectors is introduced based on marginal benefit and price elasticity. The water shortage of industrial sectors is used to reflect the scarcity of water resources, and the lowest water supply standard for households and the maximum proportion of household water fee expenditure (HWFE) to household disposable income (HDI) are used to ensure the residents’ acceptability to price raising. It shows an “S-type” relationship between the optimal price raising coefficient and industrial water shortage, and two turning points are found in the curve, which are the starting and stopping points of price raising. The appearance of starting point depends on the non-negative net benefit, and the stopping point is affected by the factors that represent the residents’ acceptability to price raising. The application to Tianjin, a city in northern China with the rapid growth of population and economy but scarce water resources, shows PSRW is a potential means to improve water efficiency and optimize water resource allocation in water scarcity situations. View Full-Text
Keywords: scarcity pricing; pricing strategy in drought years; residential water; price elasticity scarcity pricing; pricing strategy in drought years; residential water; price elasticity
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MDPI and ACS Style

Yu, B.; Li, Y.; Chu, J.; Ding, W.; Fu, G.; Leng, X.; Yang, T. Pricing Strategy for Residential Water in Drought Years. Application to the City of Tianjin, China. Water 2021, 13, 1073. https://doi.org/10.3390/w13081073

AMA Style

Yu B, Li Y, Chu J, Ding W, Fu G, Leng X, Yang T. Pricing Strategy for Residential Water in Drought Years. Application to the City of Tianjin, China. Water. 2021; 13(8):1073. https://doi.org/10.3390/w13081073

Chicago/Turabian Style

Yu, Bing; Li, Yu; Chu, Jinggang; Ding, Wei; Fu, Guangtao; Leng, Xiangyang; Yang, Tiantian. 2021. "Pricing Strategy for Residential Water in Drought Years. Application to the City of Tianjin, China" Water 13, no. 8: 1073. https://doi.org/10.3390/w13081073

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