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Measuring Price Elasticities for Residential Water Demand with Limited Information

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  • H. Allen Klaiber
  • V. Kerry Smith
  • Michael Kaminsky
  • Aaron Strong

Abstract

This paper exploits the seasonal and annual changes in marginal prices for water to estimate the price elasticity of demand by residential households for water. It uses the changes in distributions of water using the census block group levels in response to changes in marginal prices of water for matched months across years. This strategy reduces the interaction effects of outdoor use and demographic fact in determining responsiveness to price. By comparing years that vary in overall water availability the framework can recover measures of how responses to price vary with season and draught conditions. The application is the urban Phoenix metropolitan area.

Suggested Citation

  • H. Allen Klaiber & V. Kerry Smith & Michael Kaminsky & Aaron Strong, 2012. "Measuring Price Elasticities for Residential Water Demand with Limited Information," NBER Working Papers 18293, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:18293
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    Cited by:

    1. 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.
    2. Nathan DeMaagd & Michael J. Roberts, 2020. "Estimating Water Demand Using Price Differences of Wastewater Services," Working Papers 202019, University of Hawaii at Manoa, Department of Economics.
    3. Daniel A. Brent & Corey Lott & Michael Taylor & Joseph Cook & Kimberly Rollins & Shawn Stoddard, 2020. "What Causes Heterogeneous Responses to Social Comparison Messages for Water Conservation?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 77(3), pages 503-537, November.
    4. Steven Buck & Maximilian Auffhammer & Stephen Hamilton & David Sunding, 2016. "Measuring Welfare Losses from Urban Water Supply Disruptions," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 3(3), pages 743-778.
    5. El-Khattabi, Ahmed Rachid & Eskaf, Shadi & Isnard, Julien P. & Lin, Laurence & McManus, Brian & Yates, Andrew J., 2021. "Heterogeneous responses to price: Evidence from residential water consumers," Journal of Environmental Economics and Management, Elsevier, vol. 107(C).
    6. 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.
    7. Elinder, Mikael & Hu, Xiao & Liang, Che-Yuan, 2021. "Water conservation and the common pool problem: Can pricing address free-riding in residential hot water consumption?," CERE Working Papers 2021:12, CERE - the Center for Environmental and Resource Economics.
    8. Wang, Jingjing & Chermak, Janie M., 2021. "Is less always more? Conservation, efficiency and water education programs," Ecological Economics, Elsevier, vol. 184(C).
    9. Osvaldo Candido & Wilfredo L. Maldonado & Cintia L. M. Araujo, 2021. "Private or Public Enterprises? Cost Inefficiency Limits - An Application to Water Supply Companies in Brazil," Working Papers, Department of Economics 2021_09, University of São Paulo (FEA-USP).
    10. 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.
    11. Darshana Rajapaksa & Robert Gifford & Benno Torgler & María A. García-Valiñas & Wasantha Athukorala & Shunsuke Managi & Clevo Wilson, 2019. "Do monetary and non-monetary incentives influence environmental attitudes and behavior? Evidence from an experimental analysis," Post-Print hal-03191523, HAL.
    12. Lee, Gi-Eu & Chou, Chang-Erh, 2020. "The Ex Ante Price Information Effect on Water Conservation: A Case Study of Taipei’s Water Tariff Adjustment," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304253, Agricultural and Applied Economics Association.
    13. Oliver R. Browne & Ludovica Gazze & Michael Greenstone, 2021. "Do Conservation Policies Work? Evidence from Residential Water Use," Environmental and Energy Policy and the Economy, University of Chicago Press, vol. 2(1), pages 190-225.
    14. Wichman, Casey J., 2017. "Information provision and consumer behavior: A natural experiment in billing frequency," Journal of Public Economics, Elsevier, vol. 152(C), pages 13-33.
    15. 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.
    16. Daniel A. Brent, 2016. "Estimating Water Demand Elasticity at the Intensive and Extensive Margin," Departmental Working Papers 2016-06, Department of Economics, Louisiana State University.
    17. Asci, Serhat & Borisova, Tatiana & Dukes, Michael D., 2015. "Price- and Non-Price Water Demand Management Strategies for Water Utilities," 2015 Annual Meeting, January 31-February 3, 2015, Atlanta, Georgia 196768, Southern Agricultural Economics Association.
    18. Nathan DeMaagd & Michael J. Roberts, 2020. "How Will Climate Change Affect Water Demand? Evidence from Hawaii Microclimates," Working Papers 202020, University of Hawaii at Manoa, Department of Economics.
    19. Nathan DeMaagd & Michael J. Roberts, 2020. "How Will Climate Change Affect Water Demand? Evidence from Hawai‘i Microclimates," Working Papers 2020-2, University of Hawaii Economic Research Organization, University of Hawaii at Manoa.
    20. 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.
    21. Ma, Sai & Smailes, Marina & Zheng, Hua & Robinson, Brian E., 2019. "Who is Vulnerable to Ecosystem Service Change? Reconciling Locally Disaggregated Ecosystem Service Supply and Demand," Ecological Economics, Elsevier, vol. 157(C), pages 312-320.
    22. Lin, Boqiang & Chen, Xing, 2018. "Is the implementation of the Increasing Block Electricity Prices policy really effective?--- Evidence based on the analysis of synthetic control method," Energy, Elsevier, vol. 163(C), pages 734-750.
    23. 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..
    24. Zhang, Zibin & Cai, Wenxin & Feng, Xiangzhao, 2017. "How do urban households in China respond to increasing block pricing in electricity? Evidence from a fuzzy regression discontinuity approach," Energy Policy, Elsevier, vol. 105(C), pages 161-172.
    25. Daniel A. Brent & Joseph H. Cook & Skylar Olsen, 2015. "Social Comparisons, Household Water Use, and Participation in Utility Conservation Programs: Evidence from Three Randomized Trials," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 2(4), pages 597-627.

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    More about this item

    JEL classification:

    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water

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