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

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  • Jean-Daniel Rinaudo

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  • Noémie Neverre
  • Marielle Montginoul

Abstract

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

Suggested Citation

  • 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.
  • Handle: RePEc:spr:waterr:v:26:y:2012:i:7:p:2057-2068
    DOI: 10.1007/s11269-012-9998-z
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    References listed on IDEAS

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    1. S. Gaudin, 2006. "Effect of price information on residential water demand," Applied Economics, Taylor & Francis Journals, vol. 38(4), pages 383-393.
    2. Céline Nauges & Alban Thomas, 2003. "Long-run Study of Residential Water Consumption," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 26(1), pages 25-43, September.
    3. Schleich, Joachim & Hillenbrand, Thomas, 2009. "Determinants of residential water demand in Germany," Ecological Economics, Elsevier, vol. 68(6), pages 1756-1769, April.
    4. 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.
    5. 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.
    6. 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.
    7. Olmstead, Sheila M. & Michael Hanemann, W. & Stavins, Robert N., 2007. "Water demand under alternative price structures," Journal of Environmental Economics and Management, Elsevier, vol. 54(2), pages 181-198, September.
    8. 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.
    9. 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: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 25(2), pages 465-481, January.
    10. 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.
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    Citations

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    Cited by:

    1. Alexandros Polycarpou & Theodoros Zachariadis, 2013. "An Econometric Analysis of Residential Water Demand in Cyprus," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 27(1), pages 309-317, January.
    2. Corentin Girard & Jean-Daniel Rinaudo & Manuel Pulido-Velazquez & Yvan Caballero, 2015. "An interdisciplinary modelling framework for selecting adaptation measures at the river basin scale in a global change scenario," Post-Print hal-01183833, HAL.
    3. Negin Ashoori & David A. Dzombak & Mitchell J. Small, 2016. "Modeling the Effects of Conservation, Demographics, Price, and Climate on Urban Water Demand in Los Angeles, California," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 30(14), pages 5247-5262, November.
    4. repec:spr:waterr:v:31:y:2017:i:10:d:10.1007_s11269-017-1606-9 is not listed on IDEAS
    5. Xunzhou Ma & Shiqiu Zhang & Quan Mu, 2014. "How Do Residents Respond to Price under Increasing Block Tariffs? Evidence from Experiments in Urban Residential Water Demand in Beijing," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 28(14), pages 4895-4909, November.
    6. Corentin Girard & Jean-Daniel Rinaudo & Manuel Pulido-Velazquez, 2015. "Index-Based Cost-Effectiveness Analysis vs. Least-Cost River Basin Optimization Model: Comparison in the Selection of a Programme of Measures at the River Basin Scale," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 29(11), pages 4129-4155, September.
    7. Zhisong Chen & Huimin Wang & Xiangtong Qi, 2013. "Pricing and Water Resource Allocation Scheme for the South-to-North Water Diversion Project in China," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 27(5), pages 1457-1472, March.
    8. Edward Gage & David Cooper, 2015. "The Influence of Land Cover, Vertical Structure, and Socioeconomic Factors on Outdoor Water Use in a Western US City," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 29(10), pages 3877-3890, August.
    9. Ming-Feng Hung & Bin-Tzong Chie & Tai-Hsin Huang, 2017. "Residential water demand and water waste in Taiwan," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 19(2), pages 249-268, April.

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