In this paper, the thermoeconomic theory is applied to the economic optimization of a single effect water/LiBr vapour absorption refrigeration system for air-conditioning application, aimed at minimizing its overall operation and amortization cost. The mathematical and numerical techniques based optimization of thermal system is not always possible due to plant complexities. Therefore, a simplified cost minimization methodology is applied to evaluate the economic costs of all the internal flows and products of the system by formulating exergoeconomic cost equations. Once these costs are determined, the system is thermoeconomically evaluated to identify the effects of design variables on costs and enables to suggest values of design variables that would make the overall system cost effective. Finally, an approximate optimum design configuration is obtained by means of sequential local optimization of the system, carried out unit by unit. The result compares this optimum with the base case and shows percentage variations in the system's operation and amortization cost. © 2003 Elsevier Science Ltd. and IIR. All rights reserved.