Are price strategies effective in managing demand of high residential water users?
Serhat Asci (),
Tatiana Borisova () and
Applied Economics, 2017, vol. 49, issue 1, 66-77
Encouraging water use efficiency and water conservation is one of the primary goals of water utility companies nationwide. This study estimates price elasticity of residential water demand to measure the responsiveness of water use to price changes, particularly for high water users. Household-level water use data for high residential water users from Central Florida were analysed using 3-stage least square (3SLS). Estimated price elasticity ranges between −0.07 and −0.14. This price elasticity estimate is below most of the estimates reported in the literature (in absolute value). The results imply that for price strategies to be effective in managing water demand of high residential water users, a significant price increase would be needed. Overall, this study highlights the importance of designing water conservation policies tailored to specific groups of customers, and the importance of using these strategies effectively and fairly for different customer groups.
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