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Price Knowledge in Household Demand for Utility Services

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  • David W. Carter
  • J. Walter Milon

Abstract

A household’s decision to acquire price knowledge is endogenous in the demand for utility services and may affect elasticities and consumption levels. A simultaneous equation model with endogenous switching is developed to evaluate the effects of price knowledge and other sources of heterogeneity. Results indicate informed households were more responsive to average and marginal price signals. Informed households also use less water, but this is due to heterogeneity rather than price knowledge. Controlling for heterogeneity, price knowledge actually increases monthly water usage. The implications of accounting for differences in price knowledge in utility demand modeling and demand management policy are discussed.

Suggested Citation

  • David W. Carter & J. Walter Milon, 2005. "Price Knowledge in Household Demand for Utility Services," Land Economics, University of Wisconsin Press, vol. 81(2).
  • Handle: RePEc:uwp:landec:v:81:y:2005:i:2:p265-283
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • Q21 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Demand and Supply; Prices
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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