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Alternative Price Specification For Municipal Water Demands: An Empirical Test

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  • Frerichs, Stephen
  • Becker, Nir
  • Easter, K. William

Abstract

Based on data from 92 Minnesota cities, the analyses shows that neither marginal price or average price appear as the better predictor of demand. The price elasticity of demand ranges from -. 17 for marginal price in the linear model to -.27 for average price in the log linear model. It appears from the analysis that many consumers are unaware of the marginal price of their water. Thus utilities should simplify their pricing structures and present consumers with an easy to understand costs of water such as the cost of six hours of lawn watering.

Suggested Citation

  • Frerichs, Stephen & Becker, Nir & Easter, K. William, 1987. "Alternative Price Specification For Municipal Water Demands: An Empirical Test," Economic Reports 13033, University of Minnesota, Department of Applied Economics.
    • Handle: RePEc:ags:umaeer:13033
    DOI: 10.22004/ag.econ.13033
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    References listed on IDEAS

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    4. Henry S. Foster, Jr. & Bruce R. Beattie, 1979. "Urban Residential Demand for Water in the United States," Land Economics, University of Wisconsin Press, vol. 55(1), pages 43-58.
    5. Fisher, Franklin M, 1970. "Tests of Equality Between Sets of Coefficients in Two Linear Regressions: An Expository Note," Econometrica, Econometric Society, vol. 38(2), pages 361-366, March.
    6. James J. Opaluch, 1982. "Urban Residential Demand for Water in the United States: Further Discussion," Land Economics, University of Wisconsin Press, vol. 58(2), pages 225-227.
    7. Lester D. Taylor, 1975. "The Demand for Electricity: A Survey," Bell Journal of Economics, The RAND Corporation, vol. 6(1), pages 74-110, Spring.
    8. Joseph V. Terza & W. P. Welch, 1982. "Estimating Demand under Block Rates: Electricity and Water," Land Economics, University of Wisconsin Press, vol. 58(2), pages 181-188.
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    Cited by:

    1. Henrique Monteiro, 2010. "Residential Water Demand in Portugal: checking for efficiency-based justifications for increasing block tariffs," Working Papers Series 1 ercwp0110, ISCTE-IUL, Business Research Unit (BRU-IUL).

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