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Modeling Commercial Demand for Water: Exploring Alternative Prices, Instrumental Variables, and Heterogeneity

Modeling Commercial Demand for Water: Exploring Alternative Prices, Instrumental Variables, and... <p>ABSTRACT:</p><p>In this paper, we introduce a previously unused instrumental variable to estimate the elasticity of commercial water demand for firms served by a large municipal utility. We then present evidence that firms are more responsive to one-period lagged average price than marginal price. Finally, we find notable differences in elasticity among different categories of businesses. The findings in this paper are particularly important as water utilities consider how to maintain revenue while coping with limited water supplies and increasing commercial demand. <i>(JEL Q31)</i></p> http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Land Economics University of Wisconsin Press

Modeling Commercial Demand for Water: Exploring Alternative Prices, Instrumental Variables, and Heterogeneity

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Publisher
University of Wisconsin Press
Copyright
Copyright by the Board of Regents of the University of Wisconsin System.
ISSN
1543-8325

Abstract

<p>ABSTRACT:</p><p>In this paper, we introduce a previously unused instrumental variable to estimate the elasticity of commercial water demand for firms served by a large municipal utility. We then present evidence that firms are more responsive to one-period lagged average price than marginal price. Finally, we find notable differences in elasticity among different categories of businesses. The findings in this paper are particularly important as water utilities consider how to maintain revenue while coping with limited water supplies and increasing commercial demand. <i>(JEL Q31)</i></p>

Journal

Land Economics – University of Wisconsin Press

Published: Apr 11, 2019

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