In this paper, the thermoeconomic concept is applied to the optimization of a double-effect H2O/LiBr VAR system, aimed at minimizing its overall product cost. A simplified cost minimization methodology based on the thermoeconomic concept is applied to calculate the economic costs of all the internal flows and products of the system by formulating thermoeconomic cost balances. Once these costs are determined, the system is thermoeconomically evaluated to identify the effects of the design variables on cost of the flows and products. This enables to suggest changes of the design variables that would make the overall system cost-effective. Finally, an approximate optimum design configuration is obtained by means of an iterative procedure. The result shows significant improvement in the system performance. The sensitivity analysis shows that the changes in optimal values of the decision variables are negligible with changes in the fuel cost. © 2004 Elsevier Ltd and IIR. All rights reserved.