Residential Water Demand in a Mexican Biosphere Reserve: Evidence of the Effects of Perceived Price

Marco Almendarez-Hernández,Víctor Hernández Trejo,Luis Beltrán Morales,Gerzaín Avilés Polanco,Alfredo Ortega-Rubio

doi:10.3390/w8100428

Marco Almendarez-Hernández, Víctor Hernández Trejo + Show 3 more

Open Access

https://doi.org/10.3390/w8100428

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Abstract

The purpose of this paper is to provide empirical evidence for policy-makers of water management, evaluate the applicability of economic variables such as price and other factors that affect demand, and determine the impact thereof on decision-making surrounding water management in the El Vizcaino Biosphere Reserve in Mexico. We estimated a dynamic function with an average price specification, as well as price perception specification. Findings demonstrated that consumers tend to react to perceived average price but not to the marginal price. Furthermore, long-term price elasticity was found to be higher than short-term elasticity, and both elasticities were found to be inelastic. Inelastic elasticities, coupled with rising prices, generate substantial revenues with which to improve water planning and supply quality and to expand service coverage. The results suggest that users’ level of knowledge surrounding price is a key factor to take into account when restructuring rates, especially in situations where consumers do not readily possess the necessary information about their rate structure and usage within a given billing period. Furthermore, the results can help water management policy-makers to achieve goals of economic efficiency, social equity, and environmental sustainability.

Highlights

The principal sources of water for human use are rivers, lakes, and aquifers, which together represent approximately 10 million km3, less than 1% of the total volume of water that exists in the hydrosphere
Given the lack of empirical information surrounding the effectiveness of water pricing structures and the benefits associated with efficacious pricing methodologies, the objective of the present study was to estimate a dynamic function that would incorporate average price, employing the methodology of
The present study presents relevant, quantitative information that could be considered by policy makers for improving their decision-making surrounding water management policies

Summary

Introduction

The principal sources of water for human use are rivers, lakes, and aquifers, which together represent approximately 10 million km , less than 1% of the total volume of water that exists in the hydrosphere. The volume of which is approximately 68,500 km per year, a total of about 119,000 km falls on the Earth’s landmasses each year. America are the continental zones where the largest volume of water runoff occurs, with 14,100 and 12,200 km , respectively [1]. Latin America is the region with the largest volume of water per inhabitant, with 48,000 m3 [2]. Sixty-five percent of water consumption in Central America is sourced in subterranean water, and in South America this number ranges from 40% to 60% [3]

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