Perceived price in residential water demand: Evidence from a natural experiment

Casey Wichman

Journal of Economic Behavior & Organization, 2014, vol. 107, issue PA, 308-323

Abstract: Under complicated billing structures, the price to which consumers respond remains inconclusive. In this paper, I exploit a quasi-experiment to estimate a causal effect of price for residential water customers during the introduction of increasing block rates for a North Carolina utility. Perceived price is identified through a billing anomaly in which changes in marginal and average prices move in opposite directions. Empirical results contribute evidence that residential water customers respond to average price. Average price elasticity estimates vary from −0.43 to −1.14 across the distribution of consumption in triple-difference models, with an estimate of −0.31 in the tightest bandwidth of regression discontinuity specifications.

Keywords: Water demand; Price elasticity; Difference-in-difference-in-difference; Regression discontinuity; Perceived price (search for similar items in EconPapers)
JEL-codes: D12 H42 L95 Q25 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (69)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:107:y:2014:i:pa:p:308-323

DOI: 10.1016/j.jebo.2014.02.017

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