cesses moved to increasingly more effective treatments as flow level decreased. 

 At low-flow level, the water supply source for the intensive residential and urban 

 sector shifted from ground to river source, so that treatment processes could be 

 used for improving river quality. 



Resource allocation in the industrial sector was more varied and involved 

 changing production technology as well as waste-water treatment process. Public 

 treatment processes were frequently used. Although a large number of private 

 waste-water disposal alternatives were considered, few individual methods were 

 included in the optimal solutions. In paper production, only two private treat- 

 ments were included in an optimum solution; there were only two in the wool 

 industry; and there were two in the tanning industry. 



8.32 Sensitivity of BOD Shadow Price 



The shadow or implied price of BOD was sensitive to BOD loading of the 

 river. Because of the numerous alternatives, it would change for relatively small 

 changes in river loading. River-flow level had the major influence on the BOD 

 shadow price. The flow level determined the amount of BOD loading. 



8.33 Sensitivity to Price Change 



A change in price of a processing technique may have more influence on 

 optimal allocation in a totally different industry or sector. This influence is 

 always present in problems of resource-use coordination. 



The price sensitivity of selected activities in river-related sectors is shown in 

 Table 8.1. The information in Table 8.1 is based on current quality constraints 

 (BCC) for the August median-flow level and optimizing net benefits (REVOWAT). 



Resource use in the forest sector did not change, due to small changes in prices 

 of the activity. Activity in rural household, agriculture, intensive residential, 

 urban, and the industrial sectors was more sensitive to small changes in price. 

 As river-flow level increased, the resource use became more sensitive to price 

 changes. At the low-flow level, there were fewer alternatives that met the re- 

 quired degree of treatment imposed by the river-quality classification. 



In wool production, small reduction (10 percent or less) in price would result 

 in a change in technology used at median-river flow levels. A decline in price of 

 $350.41 from the $12,220 model price was required. This is about a 3 percent 

 price change. A similar pattern emerged for the paper industry but not for the 

 tanning industry. In the tanning industry, price sensitivity is found in waste-water 

 treatment process. The price stability range in tanning waste-water treatment 

 process was relatively large. This implies that a small price change would result 

 in a change in activity level but a greater than ten percent change would be 

 required for a second activity-level change. The reason for this sensitivity in 

 tanning waste-water treatment may be due to the substitutes in the alternative 

 treatment process. They were all either trickling filtration or activated sludge 

 methods. 



Public treatment of industrial waste water was employed by all industries at 

 the median-flow level, and the stabihty range in price of these activities was 

 relatively large (greater than 10 percent) in each case. 



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