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Simulating the Impact of Pricing Policies on Residential Water Demand: A Southern France Case Study

  • Jean-Daniel Rinaudo

    ()

  • Noémie Neverre
  • Marielle Montginoul
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    The case study conducted in this paper looks at residential water pricing from three different points of view. It first describes existing urban water-pricing practices in Southern France, emphasizing that pricing is not yet being used as a tool for providing economic incentives to save water. It then looks at the observed impact of pricing on water consumption, through an econometric analysis of a cross-sectional data set. The analysis suggests that demand, with an estimated price elasticity of −0.2, is not yet very responsive to price variation. A regional water model (300 municipalities) is then developed and used to simulate the potential impact of various water-pricing scenarios on aggregate water demand, aggregate water sales revenue, and consumer surpluses. The results illustrate the trade-offs that have to be made between the search for environmental effectiveness, cost recovery, and equity when implementing complex water-pricing structures such as block rates or seasonal water pricing. Copyright Springer Science+Business Media B.V. 2012

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    File URL: http://hdl.handle.net/10.1007/s11269-012-9998-z
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    Article provided by Springer in its journal Water Resources Management.

    Volume (Year): 26 (2012)
    Issue (Month): 7 (May)
    Pages: 2057-2068

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    Handle: RePEc:spr:waterr:v:26:y:2012:i:7:p:2057-2068
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    1. Schleich, Joachim & Hillenbrand, Thomas, 2009. "Determinants of residential water demand in Germany," Ecological Economics, Elsevier, vol. 68(6), pages 1756-1769, April.
    2. Sheila Olmstead & W. Michael Hanemann & Robert N. Stavins, 2007. "Water Demand Under Alternative Price Structures," NBER Working Papers 13573, National Bureau of Economic Research, Inc.
    3. S. Gaudin, 2006. "Effect of price information on residential water demand," Applied Economics, Taylor & Francis Journals, vol. 38(4), pages 383-393.
    4. Valeria Di Cosmo, 2011. "Are the Consumers Always Ready to Pay? A Quasi-Almost Ideal Demand System for the Italian Water Sector," Water Resources Management, Springer, vol. 25(2), pages 465-481, January.
    5. 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.
    6. 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 167-91, March.
    7. Montginoul, Marielle & Rinaudo, Jean-Daniel, 2011. "Controlling households' drilling fever in France: An economic modeling approach," Ecological Economics, Elsevier, vol. 71(C), pages 140-150.
    8. Sylvestre Gaudin & Ronald C. Griffin & Robin C. Sickles, 2001. "Demand Specification for Municipal Water Management: Evaluation of the Stone-Geary Form," Land Economics, University of Wisconsin Press, vol. 77(3), pages 399-422.
    9. 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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