Water Demand Under Alternative Price Structures

By Sheila M. Olmstead, William Michael Hanemann, R. Stavins, John F. Kennedy. 2007

471 citations recorded by the source corpus.

We estimate the price elasticity of water demand with household-level data, structurally modeling the piecewise-linear budget constraints imposed by increasing block pricing. We develop a mathematical expression for the unconditional price elasticity of demand under increasing block prices and compare conditional and unconditional elasticities analytically and empirically. We test the hypothesis that price elasticity may depend on price structure, beyond technical differences in elasticity concepts. Due to the possibility of endogenous utility price structure choice, observed differences in elasticity across price structures may be due either to a behavioral response to price structure, or to underlying heterogeneity among water utility service areas.

Subfields: Ocean Engineering, Renewable Energy, Sustainability and the Environment, Water Science and Technology

View Paper: https://www.semanticscholar.org/paper/ccb8b9ff8590fef89b9829cab6683f8581e168c2

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In Ocean Engineering

In Renewable Energy, Sustainability and the Environment

In Water Science and Technology

Citations in the corpus

Climate change adaptation: A study of fuel choice and consumption in the US energy sector (2008, background): “Models that explicitly consider the discrete and continuous components of consumer choice have been used to examine a wide range of topics including housing [8], food and drink [9], transportation [10,11], and water [12,13].”
The Economics of Managing Scarce Water Resources (2010, background): “…increase when price information is posted on water bills (Gaudin 2006), and that it may be higher under increasing-block prices (IBPs) than under uniform volumetric prices (Olmstead et al. 2007).2 Recent work has focused on estimating demand under IBPs, an increasingly common water price structure.”
Determinants of residential water consumption: Evidence and analysis from a 10‐country household survey (2011, background): “More recently, discrete/continuous choice models have also been developed to account for multiple prices and the potential endogeneity associated with block tariff structures [Hewitt and Hanemann, 1995; Olmstead et al., 2007].”
Does Uncertainty Matter? Consumer Behavior Under Three-Part Tariffs (2007, unknown): “Discrete/continuous choice problems have been estimated for various contexts, including the demand for utility services (Dubin and McFadden 1984, Olmstead et al. 2007, Hausman et al. 1993) and for consumer goods (Nair et al. 2005).”
The Economic Valuation of Environmental Amenities and Disamenities: Methods and Applications (2009, background): “Estimating the value of the quantity of water in residential use requires the estimation of a demand function for water (116).”
Climate change adaptation and water resource management: A review of the literature (2014, background): “plain the choice of price structure (Olmstead et al., 2007), andHewitt (2000) provides em-”
Conservation Policies: Who Responds to Price and Who Responds to Prescription? (2016, unknown): “Resources for the Future Wichman, Taylor, and von Haefen 16 and Olmstead et al. 2007).”