The generalized translog specification cost function to estimate drinking water Tarif: Case of Tunisia

This study aims to estimate the marginal cost of the drinking water supply and analyze the implications for more efficient, equitable, and revenue-sufficient water rates in Tunisia. However, pricing in Tunisian water utilities has focused on setting water prices to cover average costs, usually using increasing block rate designs. This leads to a huge waste of drinking water. In an attempt to contribute to the efficient estimation of the pricing, model, we tried to introduce a multi-product Generalized Translog (GT) cost specification that incorporates Box-Cox transformation. Findings show that the marginal social costs of providing one m³ must be composed of a two-part tariff: volumetric charges of 0,048 euro/m³ and fixed connection charges of 0,055 euro/km.