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Estimation of Residential Water Demand with Imperfect Price Perception

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  • Marie-Estelle Binet

    () (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR1 - Université de Rennes 1 - CNRS - Centre National de la Recherche Scientifique)

  • Fabrizio Carlevaro

    (Département d'économétrie et Centre universitaire d'étude des problèmes de l'énergie - UNIGE - Université de Genève)

  • Michel Paul

    (CEMOI - Centre d'Économie et de Management de l'Océan Indien - UR - Université de la Réunion)

Abstract

Using data from a household survey carried out in the French overseas territory of Réunion, we investigate the price of drinking-water perceived by households faced with an increasing, multi-step pricing scheme. To this purpose we use an improved version of the method introduced by Shin (1985) to estimate the demand for residential water when consumers are imperfectly informed about their pricing schedule. The empirical results suggest that Réunion households underestimate the price of water and thus consume more than what is economically rational. Providing information to households about the marginal price of water may be an innovative means of inducing them to respond to pricing policies designed to promote water conservation.

Suggested Citation

  • Marie-Estelle Binet & Fabrizio Carlevaro & Michel Paul, 2014. "Estimation of Residential Water Demand with Imperfect Price Perception," Post-Print halshs-00918147, HAL.
  • Handle: RePEc:hal:journl:halshs-00918147
    DOI: 10.1007/s10640-013-9750-z
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00918147
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    References listed on IDEAS

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    Cited by:

    1. Havranek, Tomas & Irsova, Zuzana & Vlach, Tomas, 2016. "Publication Bias in Measuring the Income Elasticity of Water Demand," MPRA Paper 75247, University Library of Munich, Germany.
    2. Patrícia Moura e Sá & Rita Martins, 2015. "Perceções dos Consumidores Domésticos acerca das Faturas de Água," Notas Económicas, Faculty of Economics, University of Coimbra, issue 42, pages 30-48, December.
    3. Pinto, Francisco Silva & Marques, Rui Cuhna, 2015. "Tariff recommendations: A Panacea for the Portuguese water sector?," Utilities Policy, Elsevier, vol. 34(C), pages 36-44.
    4. Tomas Havranek & Zuzana Irsova & Tomas Vlach, 2017. "Measuring the Income Elasticity of Water Demand: The Importance of Publication and Endogeneity Biases," Working Papers IES 2017/02, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Feb 2017.
    5. René Cabral & Luciano Ayala & Victor Hugo Delgado, 2017. "Residential Water Demand and Price Perception under Increasing Block Rates," Economics Bulletin, AccessEcon, vol. 37(1), pages 508-519.

    More about this item

    Keywords

    residential water demand.; residential water demand; price information policies; price perception; non nested models; increasing block tariffs; Artificial nesting;

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