Heterogeneity, Household Co-Production, and Risks of Water Services — Water Demand of Private Households with Multiple Water Sources

Private households around the world use and combine multiple water sources, including diverse forms of market services and self-supply. The reasons for this have so far not been explained in a coherent framework, nor have the implications for water management and policy been sufficiently analyzed. Here, we examine how heterogeneity of water services, household co-production, and risks of provision influence household demand patterns. We apply an economic household production model that incorporates two water quality levels for different household activities to exemplary situations. We derive a number of explanations why households use and combine water services that expand the current state of research. Relevant findings include: (i) The diverse characteristics of available water services result in different time requirements for water procurement and varying degrees of suitability for household activities. (ii) Differences in the value placed on time can induce households to demand heterogeneous water services because these enable them to find a balance between using time and money to access water. (iii) Certain water services may be demanded because they function as insurance against both uncertain and unreliable supply. Our insights are relevant for water policy, in particular for developing and managing demand-responsive systems, and for the implementation and monitoring of normative goals for access to water.