Work

Understanding the Residential Water Demand Response to Price Changes: Measuring Price Elasticity with Social Simulations

Year: 2024

Type: article

Abstract: Water pricing is an economic instrument traditionally used to reduce water demand. However, its effective implementation requires knowledge of the extent to which users reduce water consumption with increasing water prices. The price elasticity of water demand has been estimated using econometric regression, which relies on cross-sectional and time-series water data. As an alternative, we propose the use of agent-based modelling, which does not require reliable historical data on water prices and consumption and enables the simulation of multiple scenarios with different consumer profiles, behaviour profiles and water price changes, thereby allowing comprehensive understanding of price elasticity estimates. To illustrate the potential use of agent-based modelling for the estimation of water demand price elasticity, we performed an empirical application to a residential area in Chile. Price elasticity estimates ranged from −0.0159 to −0.1036 (mean −0.0250), indicating that residential water consumption is inelastic to price changes. This result is consistent with previous findings. Agent-based modelling is an alternative for the ex-ante assessment of the potential effectiveness of water pricing policies intended to reduce residential water demand.

Source: Water

DOI: 10.3390/w16172501

Authors: Pol Vidal-Lamolla, María Molinos-Senante, Manel Poch

Institutions: Universitat de Girona, Universidad de Valladolid

Language: English

Topic: Water resources management and optimization

Subfield: Ocean Engineering

Field: Engineering

Domain: Physical Sciences

SDG: Clean water and sanitation

Open Access status: gold

Estimated APC paid: $2,955