Abstract
There have been inconsistencies in past residential water demand studies concerning the specification of the relevant price variable. Both average and marginal price have been used. Households faced with the decision to expand (or contract) their water consumption are responsive to the additional cost (or savings) involved with this decision. The appropriate measure of this price is marginal price, not average price. Data were gathered from a large metropolitan area, Miami, Florida, to illustrate the divergence in estimation from two demand models, identically specified, except for the price variable. One utilized marginal price, the other average price. Predictions of consumption varied from 22 to 107% between the two models. The average price model significantly overestimated the response of consumption to price and income changes, a result worthy of consideration.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
