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Are price strategies effective in managing demand of high residential water users?

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  • Serhat Asci
  • Tatiana Borisova
  • Michael Dukes

Abstract

Encouraging water use efficiency and water conservation is one of the primary goals of water utility companies nationwide. This study estimates price elasticity of residential water demand to measure the responsiveness of water use to price changes, particularly for high water users. Household-level water use data for high residential water users from Central Florida were analysed using 3-stage least square (3SLS). Estimated price elasticity ranges between −0.07 and −0.14. This price elasticity estimate is below most of the estimates reported in the literature (in absolute value). The results imply that for price strategies to be effective in managing water demand of high residential water users, a significant price increase would be needed. Overall, this study highlights the importance of designing water conservation policies tailored to specific groups of customers, and the importance of using these strategies effectively and fairly for different customer groups.

Suggested Citation

  • Serhat Asci & Tatiana Borisova & Michael Dukes, 2017. "Are price strategies effective in managing demand of high residential water users?," Applied Economics, Taylor & Francis Journals, vol. 49(1), pages 66-77, January.
    • Handle: RePEc:taf:applec:v:49:y:2017:i:1:p:66-77
    DOI: 10.1080/00036846.2016.1192272
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    Cited by:

    1. 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.
    2. Brandli Stitzel & Cynthia L. Rogers, 2022. "Residential Water Demand Under Increasing Block Rate Structure: Conservation Conundrum?," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 36(1), pages 203-218, January.
    3. Tonke, Sebastian, 2024. "Providing procedural knowledge: A field experiment to encourage resource conservation in Namibia," Journal of Development Economics, Elsevier, vol. 166(C).
    4. Garrone, Paola & Grilli, Luca & Marzano, Riccardo, 2019. "Price elasticity of water demand considering scarcity and attitudes," Utilities Policy, Elsevier, vol. 59(C), pages 1-1.
    5. 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..
    6. de Bonviller, Simon & Wheeler, Sarah Ann & Zuo, Alec, 2020. "The dynamics of groundwater markets: Price leadership and groundwater demand elasticity in the Murrumbidgee, Australia," Agricultural Water Management, Elsevier, vol. 239(C).

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