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The Demand for Water: Consumer Response to Scarcity

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  • Krause, Kate
  • Chermak, Janie M
  • Brookshire, David S

Abstract

Provision of water raises several issues for municipal utility companies and other suppliers, including reliability of supply in arid regions or during droughts, equity issues that arise because water is literally a necessity, and heterogeneity in consumer response to regulatory policy. We combine experimental and survey responses to investigate demand for water. The experiments simulate water consumption from a potentially exhaustible source, revealing heterogeneous demand for water. We estimate econometrically water demand for different consumer groups. A regulator could use estimates of disaggregated demand to attain conservation goals by designing an incentive compatible pricing system. The example given achieves a conservation goal while minimizing enforcement costs and welfare loss. Copyright 2003 by Kluwer Academic Publishers

Suggested Citation

  • 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 167-191, March.
    • Handle: RePEc:kap:regeco:v:23:y:2003:i:2:p:167-91
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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).
    2. László Á. Kóczy, 2018. "Partition Function Form Games," Theory and Decision Library C, Springer, number 978-3-319-69841-0, March.
    3. Gorączko Marcin & Pasela Rafał, 2015. "Causes and Effects of Water Consumption Drop by the Population of Cities in Poland - Selected Aspects," Bulletin of Geography. Socio-economic Series, Sciendo, vol. 27(27), pages 67-79, March.
    4. Hans‐Theo Normann & Roberto Ricciuti, 2009. "Laboratory Experiments For Economic Policy Making," Journal of Economic Surveys, Wiley Blackwell, vol. 23(3), pages 407-432, July.
    5. Sheila M. Olmstead & Robert N. Stavins, 2008. "Comparing Price and Non-Price Approaches to Urban Water Conservation," NBER Working Papers 14147, National Bureau of Economic Research, Inc.
    6. Mansur, Erin T. & Olmstead, Sheila M., 2012. "The value of scarce water: Measuring the inefficiency of municipal regulations," Journal of Urban Economics, Elsevier, vol. 71(3), pages 332-346.
    7. Ruijs, A. & Zimmermann, A. & van den Berg, M., 2008. "Demand and distributional effects of water pricing policies," Ecological Economics, Elsevier, vol. 66(2-3), pages 506-516, June.
    8. Michael O'Donnell & Robert P. Berrens, 2018. "Understanding Falling Municipal Water Demand in a Small City Dependent on the Declining Ogallala Aquifer: Case Study of Clovis, New Mexico," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 4(04), pages 1-40, October.
    9. Vossler, Christian A. & Suter, Jordan F. & Poe, Gregory L., 2013. "Experimental evidence on dynamic pollution tax policies," Journal of Economic Behavior & Organization, Elsevier, vol. 93(C), pages 101-115.
    10. Sheila M. Olmstead, 2010. "The Economics of Managing Scarce Water Resources," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 4(2), pages 179-198, Summer.
    11. Jean-Daniel Rinaudo & Noémie Neverre & Marielle Montginoul, 2012. "Simulating the Impact of Pricing Policies on Residential Water Demand: A Southern France Case Study," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 26(7), pages 2057-2068, May.
    12. Ming-Feng Hung & Bin-Tzong Chie, 2013. "Residential Water Use: Efficiency, Affordability, and Price Elasticity," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 27(1), pages 275-291, January.
    13. Wu, Shang & Palm-Forster, Leah H. & Messer, Kent D., 2021. "Impact of peer comparisons and firm heterogeneity on nonpoint source water pollution: An experimental study," Resource and Energy Economics, Elsevier, vol. 63(C).
    14. Ward, John & Tisdell, John G. & Whitten, Stuart M., 2006. "Experimentally Testing Institutions And Policy Instruments To Coordinate Groundwater Recharge in the Coleambally Irrigation Area," 2006 Conference (50th), February 8-10, 2006, Sydney, Australia 139923, Australian Agricultural and Resource Economics Society.
    15. Garrone, Paola & Grilli, Luca & Marzano, Riccardo, 2019. "Price elasticity of water demand considering scarcity and attitudes," Utilities Policy, Elsevier, vol. 59(C), pages 1-1.
    16. Arbues, Fernando & Villanu´a, Inmaculada & Barberán Ortí, Ramón, 2010. "Household size and residential water demand: an empirical approach," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 54(1), pages 1-20.
    17. Dupont, Diane P., 2011. "Reclaimed Wastewater and the WTP to avoid Summer Water Restrictions: Incorporation Endogenous Free-riding Beliefs," 85th Annual Conference, April 18-20, 2011, Warwick University, Coventry, UK 108778, Agricultural Economics Society.
    18. Fuente, David, 2019. "The design and evaluation of water tariffs: A systematic review," Utilities Policy, Elsevier, vol. 61(C).
    19. Fernando Arbués & Inmaculada Villanúa & Ramón Barberán, 2010. "Household size and residential water demand: an empirical approach ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 54(1), pages 61-80, January.

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