Residential Water Demands

Abstract

The previous chapter demonstrates that there is substantial variation in the quantity of water used by households in different countries and climatic regions. Part of the reason for this variation stems from differing levels of water availability in differing countries. However, a major part of the explanation of differing levels of household water use must be found on the demand side-that is, by examining differences in the factors that are expected to influence households’ water use choices. The purpose of this chapter is to examine the structure of household water demands and to consider what is known regarding the factors that influence those demands. It begins with a brief theoretical treatment of consumer demand. This section is used to learn what direction is provided by theory for the construction of demand models, to identify the variables that can be expected to influence household water demands, and to clarify the types of data needed to estimate the structure of residential water demands. The chapter then turns to a discussion of the estimation of residential water demands. Section 3 provides an overview of the evolution of the empirical residential water demand literature. Section 4 considers the role of prices in determining household water demands and, in particular, examines how the econometric literature has dealt with the issue of defining the price of water when households are confronted with complex price schedules.