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Residential Water Demand and Price Perception under Increasing Block Rates

Author

Listed:
  • René Cabral

    () (EGADE Business School and Banco de México)

  • Luciano Ayala

    () (Trinity College Dublin, University of Dublin)

  • Victor Hugo Delgado

    () (El Colegio de México)

Abstract

We estimate residential water demand for Mexico´s Northern Border state of Nuevo León using data from the National Household Survey. Employing Shin's (1985) price perception model and instrumental variables (IV) techniques to deal with simultaneity problems, our findings indicate that households in the region respond to a ‘perceived' price which is considerably lower than actual water prices. Elasticity estimates for price and income are consistent with theory and previous findings in the literature.

Suggested Citation

  • René Cabral & Luciano Ayala & Victor Hugo Delgado, 2017. "Residential Water Demand and Price Perception under Increasing Block Rates," Economics Bulletin, AccessEcon, vol. 37(1), pages 508-519.
  • Handle: RePEc:ebl:ecbull:eb-16-00624
    as

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    References listed on IDEAS

    as
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    3. Wichman, Casey J., 2014. "Perceived price in residential water demand: Evidence from a natural experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PA), pages 308-323.
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    13. R. Martínez-Espiñeira, 2003. "Estimating Water Demand under Increasing-Block Tariffs Using Aggregate Data and Proportions of Users per Block," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 26(1), pages 5-23, September.
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    More about this item

    Keywords

    Water demand; price perception; Mexico; instrumenal variables;

    JEL classification:

    • H4 - Public Economics - - Publicly Provided Goods
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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