Economic Pricing of Water in Agriculture using Ramsey Approach

مجله اقتصاد و توسعه کشاورزی

Article 7, Volume 26, Issue 2, July 2012, Pages 134-140   

Document Type: Research Article

DOI: 10.22067/jead2.v1391i2.15832

Authors

A. Falahati^{* 1}; K. Sohaili¹; M. Vahedi²

¹Department of Economics, Faculty of Social Science of Razi University

²Razi University

Abstract

The serious obstacles to improve water supply, has caused world debates, seeking some solutions to tackle the problem of shortages in water supply. t. Therefore, programs and policies have focused mainly on appropriate pricing approachof. Since the water industry in Iran has been monopolized by the government, an effective pricing approach is assumed to maximize the social welfare with consideration to the cost. . To consider the mentioned aspects to price water, this study used the Ramsey approach. Thy study estimated the Ramsey price of water used for the agricultural sector in Hamadan province of Iran.To determine the price, the Agricultural water demand function was estimated using time series data for the years 1370-88. Using the estimated demand function the price elasticity of demand was calculated. The water production function was also estimated using time series data for the years 1370-88.In order to estimate supply and demand functions, the ARDL model and Microfit econometric software were used. Using production function and demand function, the marginal cost and price elasticity were calculated. Applying the calculated ratios through MATLAB software, the Ramsey price of water for agriculture was measured. According to the results of this study, in the year 1388 the Ramsey price of water for agriculture was more than the paid price for industry.

Keywords

Pricing; Optimize Ramsey; Water; Agriculture