Alternatives for domestic water tariff policy in the municipality of Chania, Greece, toward water saving using game theory

Abstract

Abstract As defined in the EU Water Framework Directive, every water tariff policy should be fair toward customers, generate legitimate revenue, and motivate consumers toward water saving. In the city of Chania, Greece, the inhabitants have asked for a fairer tariff policy and exhibited the intention to save water under the implementation of stricter measures. Therefore, a two-person zero-sum game was proposed, involving a conflict of interest between the Municipal Enterprise for Water and Sewage of Chania (MEWS) (Player 1) and the city's approximately 108,000 residents (Player 2). Three scenarios for the gradual reduction of the fixed charges and the gradual increase of volumetric charges were developed, assuming a different degree of change in water consumption behavior by each consumption block of consumers. The payoff matrices, for each scenario, incorporated two clear cost strategies for Player 1, in terms of changing the current tariff policy, and four clear cost strategies for Player 2, regarding the change in consumers’ behavior. The optimal decision for both players, derived from the identification of the equilibrium point, demonstrated that domestic water consumption may be reduced by up to 4.6% while maintaining the MEWS's profit. The proposed model can provide a guide for other similar applications.