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Learning to live within your (water) budget: Evidence from allocation-based rates

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  • Pérez-Urdiales, María
  • Baerenklau, Kenneth A.

Abstract

As allocation-based rates (ABR) become more widely adopted in the residential water sector, it is important to determine whether consumers interpret the water budget as a target for water use, or if they simply respond to the increasing block design. This paper exploits a natural experiment created when ABR were adopted by a California water district, that allows us to identify households with high water use as a treatment group. We find evidence of heterogeneous customer responses, and policy-induced behavioral changes that imply customers adjust their target level of water use based on the information signal provided by the water budget.

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  • Pérez-Urdiales, María & Baerenklau, Kenneth A., 2019. "Learning to live within your (water) budget: Evidence from allocation-based rates," Resource and Energy Economics, Elsevier, vol. 57(C), pages 205-221.
    • Handle: RePEc:eee:resene:v:57:y:2019:i:c:p:205-221
    DOI: 10.1016/j.reseneeco.2019.06.002
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    Cited by:

    1. María Á. García-Valiñas & Roberto Martínez-Espiñeira & Marta Suárez-Varela Maciá, 2021. "Price and Consumption Misperception Profiles: The Role of Information in the Residential Water Sector," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 80(4), pages 821-857, December.
    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.
    3. Daminato, Claudio & Diaz-Farina, Eugenio & Filippini, Massimo & Padrón-Fumero, Noemi, 2021. "The impact of smart meters on residential water consumption: Evidence from a natural experiment in the Canary Islands," Resource and Energy Economics, Elsevier, vol. 64(C).

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    More about this item

    Keywords

    Water demand; Allocation-based rates; Convergence; Regression discontinuity design; Difference-in-differences; Latent Class Models;
    All these keywords.

    JEL classification:

    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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