A proposal for social pricing of water supply in Cote d'Ivoire

We consider the design of a nonlinear social tariff for residential water in Cote d'Ivoire, which is a case of a monopolistic private operator supplying a population of heterogeneous consumers. The proposed optimal tariff includes an initial "social" block with a low unit price, and higher consumption blocks with a monopoly pricing rule. This optimal nonlinear tariff is calibrated using econometric estimates of a panel-data residential water demand equation. Welfare changes associated with moving from the actual tariff to approximations of the optimal pricing system are computed under different tariff scenarios. We find that gains in consumer welfare would outweigh losses in producer surplus in a majority of Ivorian local communities. (c) 2008 Elsevier B.V. All rights reserved.