Graduate Thesis Or Dissertation

 

Dynamic investment and pricing decisions for municipal sewerage Public Deposited

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  • The capacity expansion investment decisions on the provision of municipal sewerage are the central aspects of this analysis. The purpose is to present a methodology, utilizing a dynamic demand and supply model of sewerage, for recommending a set of values for the investment and pricing decision variables. The outcome of the investment decisions is an economically efficient time sequence of capacity expansions. The pricing decisions involves a departure from an economically efficient set of user charges, i.e. from marginal cost pricing. The model consists of a cost function, i.e. amount of capacity and variable operating factors used per period times price; a set of production process equations transforming influent to effluent water quality standards; and a set of factors affecting influent, cost, and production. The factors taken into consideration are: Economies of size in capacity expansion costs, technological change, inflation, deterioration of capacity and economic life of capacity, discounting to present value, time horizon of model, changes in effluent water quality standards, and changes in the flow of influent due to an increase in users, price elasticity of the flow of influent and changes in water consumptive habits, formation of substitutes through technological change, as well as rainstorm drainage and infiltration. It is the investment decisions on timing of capacity expansions and mix of capacity types in each expansion which are of concern. These investment decisions must be considered simultaneously with those on economic amortization of capacity expansion costs and economic life of capacity, as well as use of, variable operating factors in the production process. Furthermore consideration for pricing in terms of user charges is given. By simultaneously solving a set of necessary marginal conditions associated with the investment decision variables and use of variable operating factors, the timing of capacity expansions and mix of capacity types in each expansion may be derived. With the existence of several capacity types, several variable operating factors, numerous feasible times for a capacity expansion, and a set of complex equations representing the production process; the use of a simulation analysis is imperative. Formulation of a simulation model should be on the basis of the equations developed in this analysis. Though the values of the decision variables resulting from a Simulation analysis may not be optimal, i.e. minimize present value cost subject to a production output constraint, the present value cost for a set of feasible time sequence of capacity expansions may be compared under various influent, cost, and production conditions.
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