Entitlements to marketable water rate options (coupons) have been shown capable
of addressing the issue of equity in water pricing, thus allowing efficient marginal cost pricing. This article proposes a "behind the scenes" variation that eliminates
learning or transaction costs on the part of the consumer. The article proceeds to
explore possibilities to adjust water rates so as to enhance revenues along with
efficiency while using the companion instrument of transferable rate entitlements to
address equity concerns. This combination opens up possibilities for privatization
or deregulation of municipal water utilities.
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