Demand for Water under Dynamic Conditions

Abstract

An empirical analysis of the effects on residential water use of changing from a flat rate price structure to a metered one is presented. Time series data, for the first time, are used to study the dynamics of residential water demand. The results include the observations that: (1) sprinkling demands were reduced by the introduction of meters, with actual sprinkling being greater than the calculated ideal under flat rates and less than ideal under metered rates; (2) sprinkling use not only declined with the introduction of meters but subsequently continued to decline; (3) domestic demands (in-house) were reduced by 36% after meter installation; and (4) domestic demands stabilized at these lower levels. The evidence generated by the analysis demonstrates that water users do not return to their old use patterns after meters are installed, and that metering results in a permanent and significant improvement in water use efficiency. INTRODUCTIONThe urban water industry is one of the oldest and largest industries in the United States. Nevertheless, the attention given to this industry by economists can be characterized as being both cursory and sporadic. The present investigation has attempted to analyze the demand for residential water in Boulder, Colorado, under dynamic conditions. Numerous responses can induce movements toward equilibrium in an urban water market that is in a state of temporary disequilibrium because of water 'shortages.' These responses can be classified into two broad groups, the first representing those that affect the supply and the second representing those that affect demand. The first set of adjustments is primarily technical in nature and attempts to bring about an eqUilibriUm in the market by increasing the supply. This increase can be accomplished by developing local potentials, importing water from other areas, developing reuse facilities, engaging in weather modification, pursuing activities in evaporation and leakage control, and constructing desalination facilities. The second set of adjustments induces a movement toward equilibrium in the water market by affecting consumers' behavior and choice. Included in this set of adjustments are restrictions on water use, changes from flat rate to commodity charges through metering, and modifications in the eommodity's price where meters exist. This paper focuses on the demand side of the market and represents an empirical analysis of the effects of changing from a flat rate price structure to a metered one. 200 150 o •_ I00 z 5O METERED RATE CUMULATIVE SPRINKLING AVERAGE ROUTES 70-71-72 ß ß ß ß ß JOJAJOJAJOJAJOJAJOJAJOJ J 0 J A J 0 J A J 0 J A J 0 J A J 0 J A J 0 J A J 0 J A J'•)",•"•'•J"(•"•

The Economics of Household Demand for Water: The Case of Kandy Municipality, Sri Lanka

“…For example, linear speci cation was used by Hanke (1970), Young (1973) and many other researchers. Log linear models were used by Young (1973), Danielson (1979) and Nieswiadomy (1992).…”

Changing Water and Sewer Finance:Distributional Impacts and Effects on the Viability of Affordable Housing

“…8 Several studies found that the transition from flat rates to metering in Denver had almost no effect on inhome water use (Brown & Caldwell, 1984). Hanke (1970), however, found a 36% reduction in in-home use after Boulder, Colorado, switched to metering. A drawback of this literature for our purposes is that it focuses on single-family dwellings.…”

The Demand for Water by Single‐Metered and Group‐Metered Households

“…Grossman et al (1993, p. 159, n. 16) cite the result of Hanke (1970) where water consumption in Boulder, Colorado, was found to decrease after the replacement of a fixed charge by a metered pricing structure. They suggest that, 'though Hanke did not suggest free-rider behaviour as an explanation for the observed phenomenon, it is a consistent explanation'.…”