Pricing of water may affect allocation considerations by users. Efficiency is attainable whenever the pricing method affects the demand for irrigation water. The extent to which water pricing methods can affect income redistribution is limited. To affect income inequality, a water pricing method must include certain forms of water quantity restrictions. Economic efficiency has to do with how much wealth a given resource base can generate.
Equity has to do with how that wealth is to be distributed in society.
Economic efficiency gets far more attention, in part because equity considerations involve value judgments that vary from person to person. Tsur and Dinar examine both the efficiency and the equity of different methods of pricing irrigation water. After describing water pricing practices in a number of countries, they evaluate their efficiency and equity. In general they find that water use is most efficient when pricing affects the demand for water. But they are usually easier to implement and administer and require less information.