IDEAS home Printed from https://ideas.repec.org/a/ebl/ecbull/eb-16-00624.html
   My bibliography  Save this article

Residential Water Demand and Price Perception under Increasing Block Rates

Author

Listed:
  • René Cabral

    (EGADE Business School and Banco de México)

  • Luciano Ayala

    (Trinity College Dublin, University of Dublin)

  • Victor Hugo Delgado

    (El Colegio de México)

Abstract

We estimate residential water demand for Mexico´s Northern Border state of Nuevo León using data from the National Household Survey. Employing Shin's (1985) price perception model and instrumental variables (IV) techniques to deal with simultaneity problems, our findings indicate that households in the region respond to a ‘perceived' price which is considerably lower than actual water prices. Elasticity estimates for price and income are consistent with theory and previous findings in the literature.

Suggested Citation

  • René Cabral & Luciano Ayala & Victor Hugo Delgado, 2017. "Residential Water Demand and Price Perception under Increasing Block Rates," Economics Bulletin, AccessEcon, vol. 37(1), pages 508-519.
    • Handle: RePEc:ebl:ecbull:eb-16-00624
    as

    Download full text from publisher

    File URL: http://www.accessecon.com/Pubs/EB/2017/Volume37/EB-17-V37-I1-P46.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Hajispyrou, Soteroula & Koundouri, Phoebe & Pashardes, Panos, 2002. "Household demand and welfare: implications of water pricing in Cyprus," Environment and Development Economics, Cambridge University Press, vol. 7(4), pages 659-685, October.
    2. Wichman, Casey J., 2014. "Perceived price in residential water demand: Evidence from a natural experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PA), pages 308-323.
    3. Andrew C. Worthington & Mark Hoffman, 2008. "An Empirical Survey Of Residential Water Demand Modelling," Journal of Economic Surveys, Wiley Blackwell, vol. 22(5), pages 842-871, December.
    4. Mary E. Renwick & Sandra O. Archibald, 1998. "Demand Side Management Policies for Residential Water Use: Who Bears the Conservation Burden?," Land Economics, University of Wisconsin Press, vol. 74(3), pages 343-359.
    5. Geoffrey J. Syme & Blair E. Nancarrow & Clive Seligman, 2000. "The Evaluation of Information Campaigns to Promote Voluntary Household Water Conservation," Evaluation Review, , vol. 24(6), pages 539-578, December.
    6. Michael L. Nieswiadomy & David J. Molina, 1991. "A Note on Price Perception in Water Demand Models," Land Economics, University of Wisconsin Press, vol. 67(3), pages 352-359.
    7. Shin, Jeong-Shik, 1985. "Perception of Price When Price Information Is Costly: Evidence from Residential Electricity Demand," The Review of Economics and Statistics, MIT Press, vol. 67(4), pages 591-598, November.
    8. Barkatullah, Nadira, 1996. "OLS and Instrumental Variable Price Elasticity Estimates for Water in Mixed-Effects Model Under Multiple Tariff Structure," Working Papers 226, University of Sydney, School of Economics.
    9. R. Martínez-Espiñeira, 2003. "Estimating Water Demand under Increasing-Block Tariffs Using Aggregate Data and Proportions of Users per Block," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 26(1), pages 5-23, September.
    10. Marie-Estelle Binet & Fabrizio Carlevaro & Michel Paul, 2014. "Estimation of Residential Water Demand with Imperfect Price Perception," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 59(4), pages 561-581, December.
    11. Jaramillo-Mosqueira, Luis A., 2005. "Evaluación econométrica de la demanda de agua de uso residencial en México," El Trimestre Económico, Fondo de Cultura Económica, vol. 0(286), pages 367-390, abril-jun.
    12. Hajispyrou, Soteroula & Koundouri, Phoebe & Pashardes, Panos, 2002. "Household demand and welfare: implications of water pricing in Cyprus," Environment and Development Economics, Cambridge University Press, vol. 7(4), pages 659-685, October.
    13. Sylvestre Gaudin & Ronald C. Griffin & Robin C. Sickles, 2001. "Demand Specification for Municipal Water Management: Evaluation of the Stone-Geary Form," Land Economics, University of Wisconsin Press, vol. 77(3), pages 399-422.
    14. Michael L. Nieswiadomy & David J. Molina, 1989. "Comparing Residential Water Demand Estimates under Decreasing and Increasing Block Rates Using Household Data," Land Economics, University of Wisconsin Press, vol. 65(3), pages 280-289.
    15. Paul J. Ferraro & Michael K. Price, 2013. "Using Nonpecuniary Strategies to Influence Behavior: Evidence from a Large-Scale Field Experiment," The Review of Economics and Statistics, MIT Press, vol. 95(1), pages 64-73, March.
    16. James Yoo & Silvio Simonit & Ann P. Kinzig & Charles Perrings, 2014. "Estimating the Price Elasticity of Residential Water Demand: The Case of Phoenix, Arizona," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 36(2), pages 333-350.
    17. John A. Nordin, 1976. "A Proposed Modification of Taylor's Demand Analysis: Comment," Bell Journal of Economics, The RAND Corporation, vol. 7(2), pages 719-721, Autumn.
    18. Lester D. Taylor, 1975. "The Demand for Electricity: A Survey," Bell Journal of Economics, The RAND Corporation, vol. 6(1), pages 74-110, Spring.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Michael O'Donnell & Robert P. Berrens, 2018. "Understanding Falling Municipal Water Demand in a Small City Dependent on the Declining Ogallala Aquifer: Case Study of Clovis, New Mexico," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 4(04), pages 1-40, October.
    2. María Ángeles García-Valiñas & Sara Suárez-Fernández, 2022. "Are Economic Tools Useful to Manage Residential Water Demand? A Review of Old Issues and Emerging Topics," Post-Print hal-04067487, HAL.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Andrew C. Worthington & Mark Hoffman, 2008. "An Empirical Survey Of Residential Water Demand Modelling," Journal of Economic Surveys, Wiley Blackwell, vol. 22(5), pages 842-871, December.
    2. Mónica Maldonado-Devis & Vicent Almenar-Llongo, 2021. "A Panel Data Estimation of Domestic Water Demand with IRT Tariff Structure: The Case of the City of Valencia (Spain)," Sustainability, MDPI, vol. 13(3), pages 1-26, January.
    3. María Ángeles García-Valiñas & Sara Suárez-Fernández, 2022. "Are Economic Tools Useful to Manage Residential Water Demand? A Review of Old Issues and Emerging Topics," Post-Print hal-04067487, HAL.
    4. Guillermo Ignacio Acuña & Cristián Echeverría & Alex Godoy & Felipe Vásquez, 2020. "The role of climate variability in convergence of residential water consumption across Chilean localities," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 22(1), pages 89-108, January.
    5. Worthington, Andrew C., 2010. "Commercial and Industrial Water Demand Estimation: Theoretical and Methodological Guidelines for Applied Economics Research/Estimación de la demanda de agua comercial e industrial: pautas teóricas y m," Estudios de Economia Aplicada, Estudios de Economia Aplicada, vol. 28, pages 237-258, Agosto.
    6. Acuña, Guillermo, 2017. "Elasticidades de la demanda de agua en Chile [Elasticities of water demand in Chile]," MPRA Paper 82916, University Library of Munich, Germany.
    7. Arbues, Fernando & Garcia-Valinas, Maria Angeles & Martinez-Espineira, Roberto, 2003. "Estimation of residential water demand: a state-of-the-art review," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 32(1), pages 81-102, March.
    8. Henrique Monteiro, 2010. "Residential Water Demand in Portugal: checking for efficiency-based justifications for increasing block tariffs," Working Papers Series 1 ercwp0110, ISCTE-IUL, Business Research Unit (BRU-IUL).
    9. Ming-Feng Hung & Bin-Tzong Chie, 2013. "Residential Water Use: Efficiency, Affordability, and Price Elasticity," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 27(1), pages 275-291, January.
    10. Ming-Feng Hung & Bin-Tzong Chie & Tai-Hsin Huang, 2017. "Residential water demand and water waste in Taiwan," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 19(2), pages 249-268, April.
    11. Wichman, Casey J. & Taylor, Laura O. & von Haefen, Roger H., 2016. "Conservation policies: Who responds to price and who responds to prescription?," Journal of Environmental Economics and Management, Elsevier, vol. 79(C), pages 114-134.
    12. Diakité, Daouda & Thomas, Alban, 2011. "La demande domestique d’eau potable : une étude sur un panel de communes ivoiriennes," L'Actualité Economique, Société Canadienne de Science Economique, vol. 87(3), pages 269-299, septembre.
    13. Liang Lu & David Deller & Morten Hviid, 2019. "Price and Behavioural Signals to Encourage Household Water Conservation: Implications for the UK," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 33(2), pages 475-491, January.
    14. Michael O'Donnell & Robert P. Berrens, 2018. "Understanding Falling Municipal Water Demand in a Small City Dependent on the Declining Ogallala Aquifer: Case Study of Clovis, New Mexico," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 4(04), pages 1-40, October.
    15. Milan Ščasný & Šarlota Smutná, 2021. "Estimation of price and income elasticity of residential water demand in the Czech Republic over three decades," Journal of Consumer Affairs, Wiley Blackwell, vol. 55(2), pages 580-608, June.
    16. Liang Lu & David Deller & Morten Hviid, 2018. "Price and Behavioural Signals to Encourage Household Water Conservation in Temperate Climates," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2018-01, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    17. Ramón Barberán & Julio López-Laborda & Fernando Rodrigo, 2022. "The Perception of Residential Water Tariff, Consumption, and Cost: Evidence of its Determinants Using Survey Data," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 36(9), pages 2933-2952, July.
    18. Arjan Ruijs, 2007. "Welfare and Distribution Effects of Water Pricing Policies," Working Papers 2007.92, Fondazione Eni Enrico Mattei.
    19. Teresa Torregrosa & Martín Sevilla & Borja Montaño & Victoria López-Vico, 2010. "The Integrated Management of Water Resources in Marina Baja (Alicante, Spain). A Simultaneous Equation Model," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 24(14), pages 3799-3815, November.
    20. Darío F. Jiménez & Sergio A. Orrego & Felipe A. Vásquez & Roberto D. Ponce, 2017. "Estimating water demand for urban residential use using a discrete-continuous model and disaggregated data at the household level: the case of the city of Manizales, Colombia," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 86, pages 153-178, Enero - J.

    More about this item

    Keywords

    Water demand; price perception; Mexico; instrumenal variables;
    All these keywords.

    JEL classification:

    • H4 - Public Economics - - Publicly Provided Goods
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-16-00624. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: John P. Conley (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.