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Price and Non-Price Influences on Water Conservation: An Econometric Model of Aggregate Demand under Nonlinear Budget Constraint

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  • Corral, Leonardo
  • Fisher, Anthony C.
  • Hatch, Nile W.

Abstract

This paper develops a model of residential water demand under a nonlinear budget constraint. The theoretical model for an individual consumer is adapted to yield an aggregate model that preserves the structure of the individual demand function, and that can be used with aggregate (water district level) data. The model is used to study the influence of pricing and non-price conservation programs on consumption and conservation behavior in three water districts in the San Francisco Bay Area, over a 10-year period that includes both drought and normal years. Empirical results show that pricing can be effective in reducing water consumption, particularly during the annual dry season, and during longer drought episodes. The effect is mitigated when non-price conservation programs are included in the analysis. Among these, use restrictions and landscaping audits appear to be particularly effective in inducing conservation.

Suggested Citation

  • Corral, Leonardo & Fisher, Anthony C. & Hatch, Nile W., 1999. "Price and Non-Price Influences on Water Conservation: An Econometric Model of Aggregate Demand under Nonlinear Budget Constraint," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt3gx868tg, Department of Agricultural & Resource Economics, UC Berkeley.
  • Handle: RePEc:cdl:agrebk:qt3gx868tg
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    References listed on IDEAS

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    1. Henry S. Foster, Jr. & Bruce R. Beattie, 1981. "On the Specification of Price in Studies of Consumer Demand under Block Price Scheduling," Land Economics, University of Wisconsin Press, vol. 57(4), pages 624-629.
    2. J. E. Schefter & E. L. David, 1985. "Estimating Residential Water Demand under Multi-Part Tariffs Using Aggregate Data," Land Economics, University of Wisconsin Press, vol. 64(3), pages 272-280.
    3. Julie A. Hewitt & W. Michael Hanemann, 1995. "A Discrete/Continuous Choice Approach to Residential Water Demand under Block Rate Pricing," Land Economics, University of Wisconsin Press, vol. 71(2), pages 173-192.
    4. Fisher Anthony & Fullerton David & Hatch Nile & Reinelt Peter, 1995. "Alternatives for Managing Drought: A Comparative Cost Analysis," Journal of Environmental Economics and Management, Elsevier, vol. 29(3), pages 304-320, November.
    5. R. Bruce Billings & Donald E. Agthe, 1980. "Price Elasticities for Water: A Case of Increasing Block Rates," Land Economics, University of Wisconsin Press, vol. 56(1), pages 73-84.
    6. Mary E. Renwick & Sandra O. Archibald, 1998. "Demand Side Management Policies for Residential Water Use: Who Bears the Conservation Burden?," Land Economics, University of Wisconsin Press, vol. 74(3), pages 343-359.
    7. Michael L. Nieswiadomy & David J. Molina, 1989. "Comparing Residential Water Demand Estimates under Decreasing and Increasing Block Rates Using Household Data," Land Economics, University of Wisconsin Press, vol. 65(3), pages 280-289.
    8. Joseph V. Terza & W. P. Welch, 1982. "Estimating Demand under Block Rates: Electricity and Water," Land Economics, University of Wisconsin Press, vol. 58(2), pages 181-188.
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    Cited by:

    1. Kertous, Mourad & Zerzour, Sahad, 2015. "To pay or not to pay? Water bill and delay in payment in Bejaia (Algeria): A duration analysis," MPRA Paper 67801, University Library of Munich, Germany.

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