Research On Water Price Forecasting For Urban Residents

The scarcity of water resource becomes more and more serious. Water price as ameans of resource allocation between users, its importance is more and more obvious.There is an abundant literature on water pricing, but most of them focused on theestablishment of single price model and parameter estimation. The most consensualresult from the water pricing literature is that efficiency requires marginal cost pricing.Single marginal cost pricing will have some disadvantage. It does not ensure that thewater utility generates enough, and just enough, revenues to cover costs. This studyimproves the research based on the marginal cost pricing.Cost function and demand functions are established at the same time. Firstly, thispaper analyzes the basic theories of the model—the first-best theory and the demandtheory. Based on the theory, the cost function and demand function are obtained byusing the second order Taylor expansion and Shephard’s lemma. In the empiricalresearch part, the theoretical model is applied to the Suzhou. The descriptive statistic ismade for each variable in Eviews. The parameters of cost function and demand functionwere obtained by using panel data model. By using scenario analysis the water pricechange is analyzed under certain situation.The empirical study demonstrates the feasibility of the theory model. Although themodel is verified by using Suzhou data, this model based on the theory is suitable forwater price prediction of each local region. The results of the research are: Thedemand-elasticity of water price is significant negative. The influence of income towater price is significant under certain extent. The influence of domestic size on theprice is not significant. As expected, the proportion of industrial users has significantinfluence on the water price. The influence of rain on price is very small. The rainalmost has no influence on the price.