Does marginal price matter? : A regression discontinuity approach to estimating water demand
AbstractAlthough complex pricing schedules are increasingly common among water and electricity providers, it is difficult to determine whether consumers respond to changes in the pricing schedule because price changes are often confounded with simultaneous demand shocks or non-price policies. To overcome this challenge, we exploit a natural experiment - the introduction of a third price block in an increasing block pricing schedule for water - in Santa Cruz, California. Using a regression discontinuity design, we find that consumers do respond to changes in marginal price. Doubling marginal price leads to a 12% decrease in water use (500 cubic feet per bill) among high-use households.
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Bibliographic InfoPaper provided by University of California at Berkeley, Department of Agricultural and Resource Economics and Policy in its series CUDARE Working Paper Series with number 1077.
Length: 35 pages
Date of creation: 2008
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Postal: University of California, Giannini Foundation of Agricultural Economics Library, 248 Giannini Hall #3310, Berkeley CA 94720-3310
Other versions of this item:
- Nataraj, Shanthi & Hanemann, W. Michael, 2011. "Does marginal price matter? A regression discontinuity approach to estimating water demand," Journal of Environmental Economics and Management, Elsevier, vol. 61(2), pages 198-212, March.
- Nataraj, Shanthi & Hanemann, W. Michael, 2008. "Does Marginal Price Matter? A Regression Discontinuity Approach to Estimating Water Demand," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt2jc295gr, Department of Agricultural & Resource Economics, UC Berkeley.
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