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Simulating the Impact of Pricing Policies on Residential Water Demand: A Southern France Case Study

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  • Jean-Daniel Rinaudo

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  • Noémie Neverre
  • Marielle Montginoul
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    Abstract

    The case study conducted in this paper looks at residential water pricing from three different points of view. It first describes existing urban water-pricing practices in Southern France, emphasizing that pricing is not yet being used as a tool for providing economic incentives to save water. It then looks at the observed impact of pricing on water consumption, through an econometric analysis of a cross-sectional data set. The analysis suggests that demand, with an estimated price elasticity of −0.2, is not yet very responsive to price variation. A regional water model (300 municipalities) is then developed and used to simulate the potential impact of various water-pricing scenarios on aggregate water demand, aggregate water sales revenue, and consumer surpluses. The results illustrate the trade-offs that have to be made between the search for environmental effectiveness, cost recovery, and equity when implementing complex water-pricing structures such as block rates or seasonal water pricing. Copyright Springer Science+Business Media B.V. 2012

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    File URL: http://hdl.handle.net/10.1007/s11269-012-9998-z
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    Bibliographic Info

    Article provided by Springer in its journal Water Resources Management.

    Volume (Year): 26 (2012)
    Issue (Month): 7 (May)
    Pages: 2057-2068

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    Handle: RePEc:spr:waterr:v:26:y:2012:i:7:p:2057-2068

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    Web page: http://www.springer.com/economics/journal/11269

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    Related research

    Keywords: Demand elasticity; France; Water pricing; Residential water demand; Simulation;

    References

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    1. Montginoul, Marielle & Rinaudo, Jean-Daniel, 2011. "Controlling households' drilling fever in France: An economic modeling approach," Ecological Economics, Elsevier, vol. 71(C), pages 140-150.
    2. S. Gaudin, 2006. "Effect of price information on residential water demand," Applied Economics, Taylor & Francis Journals, vol. 38(4), pages 383-393.
    3. Sheila Olmstead & W. Michael Hanemann & Robert N. Stavins, 2007. "Water Demand Under Alternative Price Structures," NBER Working Papers 13573, National Bureau of Economic Research, Inc.
    4. 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.
    5. Valeria Di Cosmo, 2011. "Are the Consumers Always Ready to Pay? A Quasi-Almost Ideal Demand System for the Italian Water Sector," Water Resources Management, Springer, vol. 25(2), pages 465-481, January.
    6. Schleich, Joachim & Hillenbrand, Thomas, 2007. "Determinants of residential water demand in Germany," Working Papers "Sustainability and Innovation" S3/2007, Fraunhofer Institute for Systems and Innovation Research (ISI).
    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. Krause, Kate & Chermak, Janie M & Brookshire, David S, 2003. "The Demand for Water: Consumer Response to Scarcity," Journal of Regulatory Economics, Springer, vol. 23(2), pages 167-91, March.
    9. 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.
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    Cited by:
    1. Zhisong Chen & Huimin Wang & Xiangtong Qi, 2013. "Pricing and Water Resource Allocation Scheme for the South-to-North Water Diversion Project in China," Water Resources Management, Springer, vol. 27(5), pages 1457-1472, March.
    2. Alexandros Polycarpou & Theodoros Zachariadis, 2013. "An Econometric Analysis of Residential Water Demand in Cyprus," Water Resources Management, Springer, vol. 27(1), pages 309-317, January.

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