Water-Saving Technology and Efficient Tariffs

Dynamic model of efficient allocation of water with three sources of water supply (groundwater, surface water and the recycling technology with limited capacity) is constructed and analyzed. It is shown that in case of binding capacity constraint we can abandon the use of groundwater at some moment and then revert to it some time in future. Efficient path could be decentralized under suitable water tariffs. Comparative analyses of water tariffs for the two users that differ only in terms of the availability of recycling technology are undertaken.