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A relational contract for water demand management

Amit, RK and Ramachandran, Parthasarathy (2013) A relational contract for water demand management. In: Urban Water Journal, 10 (3). pp. 209-215.

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Official URL: http://dx.doi.org/10.1080/1573062X.2012.724076


For necessary goods like water, under supply constraints, fairness considerations lead to negative externalities. The objective of this paper is to design an infinite horizon contract or relational contract (a type of long-term contract) that ensures self-enforcing (instead of court-enforced) behaviour by the agents to mitigate the externality due to fairness issues. In this contract, the consumer is induced to consume at firm-supply level using the threat of higher fair price for future time periods. The pricing mechanism, computed in this paper, internalizes the externality and is shown to be economically efficient and provides revenue sufficiency.

Item Type: Journal Article
Publication: Urban Water Journal
Publisher: Taylor and Francis Group
Additional Information: Copyright of this article belongs to Taylor and Francis Group.
Keywords: Water Demand Management; Contract Theory; Relational Contracts
Department/Centre: Division of Interdisciplinary Sciences > Management Studies
Date Deposited: 21 Aug 2013 06:18
Last Modified: 21 Aug 2013 06:18
URI: http://eprints.iisc.ac.in/id/eprint/46987

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