Measuring Price Elasticities for Residential Water Demand with Limited Information

H. Allen Klaiber, V. Kerry Smith, Michael Kaminsky and Aaron Strong


This paper exploits the seasonal and annual changes in marginal prices for water to estimate the price elasticity of demand by residential households for water. It uses the changes in distributions of water used at the census block group levels in response to changes in marginal prices of water for matched months across years. This strategy reduces the interaction effects of outdoor use and demographic factors in determining responsiveness to price. By comparing years that vary in overall water availability, the framework can recover measures of how responses to price vary with season and drought conditions. The application is the urban Phoenix metropolitan area. (JEL H42, Q25)

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