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Estimation of residential water demand with imperfect price perception

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Author Info

  • Marie-Estelle Binet

    ()
    (CREM - Centre de Recherche en Economie et Management - CNRS : UMR6211 - Université de Rennes 1 - Université de Caen Basse-Normandie)

  • Fabrizio Carlevaro

    (Département d'économétrie et Centre universitaire d'étude des problèmes de l'énergie - Université de Genève)

  • Michel Paul

    (CERESUR - Centre d'Etudes et de Recherches Economique et Sociales de l'Université de La Réunion - Université de la Réunion)

Abstract

Using data from a household survey carried out in the French overseas territory of Réunion, we investigate the price of drinking-water perceived by households faced with an increasing, multi-step pricing scheme. To this purpose we use an improved version of the method introduced by Shin (1985) to estimate the demand for residential water when consumers are imperfectly informed about their pricing schedule. The empirical results suggest that Réunion households underestimate the price of water and thus consume more than what is economically rational. Providing information to households about the marginal price of water may be an innovative means of inducing them to respond to pricing policies designed to promote water conservation.

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Bibliographic Info

Paper provided by HAL in its series Post-Print with number halshs-00918147.

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Date of creation: 13 Dec 2013
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Publication status: Published, Environmental and Resource Economics, 2013, online
Handle: RePEc:hal:journl:halshs-00918147

Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00918147
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Related research

Keywords: Artificial nesting; increasing block tariffs; non nested models; price information policies; price perception; residential water demand.;

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  1. 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.
  2. Arjan Ruijs, 2009. "Welfare and Distribution Effects of Water Pricing Policies," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 43(2), pages 161-182, June.
  3. 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.
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