ALLOCATION AND PRICING AT THE WATER DISTRICT LEVEL

Efficient water pricing schemes are introduced for nonprofit water age ncies, where members have property rights based upon historical usage. The existing average cost rate design is compared with the proposed d esigns, ''active trading'' and ''passive trading.'' Both schemes lead to efficiency, but ''passive trading'' has operational advantages sinc e it generates less transaction costs than ''active trading.'' Block r ate pricing is shown to be suboptimal and inferior to ''passive tradin g.'' An example from the Israeli water economy is used as an empirical illustration.