NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Michael Hanemann

University of California
Depart. of Agricultural & Resource Economics
207 Giannini Hall
Berkeley, CA 94720

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NBER Working Papers and Publications

November 2007Water Demand Under Alternative Price Structures
with Sheila Olmstead, Robert N. Stavins: w13573
We estimate the price elasticity of water demand with household-level data, structurally modeling the piecewise-linear budget constraints imposed by increasing-block pricing. We develop a mathematical expression for the unconditional price elasticity of demand under increasing-block prices and compare conditional and unconditional elasticities analytically and empirically. We test the hypothesis that price elasticity may depend on price structure, beyond technical differences in elasticity concepts. Due to the possibility of endogenous utility price structure choice, observed differences in elasticity across price structures may be due either to a behavioral response to price structure, or to underlying heterogeneity among water utility service areas.

Published: Olmstead, Sheila M. & Michael Hanemann, W. & Stavins, Robert N., 2007. "Water demand under alternative price structures," Journal of Environmental Economics and Management, Elsevier, vol. 54(2), pages 181-198, September. citation courtesy of

 
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