Tiered Pricing and Cost Functions: Are Equity, Cost Recovery and Economic Efficiency Compatible Goals?

Suppliers of water and energy are frequently natural monopolies, with their pricing regulated by governmental agencies. Pricing schemes are evaluated by the efficiency of the resource allocation they lead to, the capacity of the utilities to capture their costs and the distributional effects of the policies, in particular, impacts on the poor. One pricing approach has been average cost pricing, which guarantees cost recovery and allows utilities to provide their product at relatively low prices. However, average cost pricing leads to economically inefficient consumption levels, when sources of water and energy are limited and increasing the supply is costly. An alternative approach is increasing block rates (hereafter, IBR or tiered pricing), where individuals pay a low rate for an initial consumption block and a higher rate as they increase use beyond that block. An example of IBR is shown in Figure 1 (on next page), which shows a rate structure for residential water use. With the rates in Figure 1, a household would be charged $0.46 and $0.71 per hundred gallons for consumption below and above 21,000 gallons per month, respectively.

Deterministic Solutions for a Step-growth Polymerization

Chain topology, including branch node, chain link and cross-link dynamics that contribute to the number of elastically active strands and junctions, are calculated using purely deterministic derivations. Solutions are not coupled to population density distributions. An eigenzeit transformation assists in the conversion of expressions derived by chemical reaction principles from time to conversion space, yielding transport phenomena type expressions where the rate of change in the molar concentrations of branch nodes with respect to conversion is expressed as functions of the fraction of reactive sites on precursors and reactants. Analogies are hypothesized to exist in cross-linking space that effectively distribute branch nodes with i reacted moieties between cross-links having j bonds extending to the gel. To obtain solutions, reacted sites on nodes or links with finite chain extensions are examined in terms of stoichiometry associated with covalent bonding. Solutions replicate published results based on Miller and Macosko’s recursive procedure and results obtained from truncated weighted sums of population density distributions as suggested by Flory.