Estimation of residential water demand with imperfect price perception
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.
|Date of creation:||13 Dec 2013|
|Date of revision:|
|Publication status:||Published, Environmental and Resource Economics, 2013, online|
|Note:||View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00918147|
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