Alternate Price Specifications for Estimating Residential Water Demand with Fixed Fees

Taylor, R. Garth; McKean, John R.; Young, Robert A.

doi:10.2307/3654732

Cited by 47 publications

(38 citation statements)

References 30 publications

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“…With about -0.86, the demand elasticity with respect to average prices is considerably larger than that for marginal prices, which is quite close to, but in statistical terms different from zero. The estimate of -0.86 is in line with the results of Taylor et al (2004), who demonstrate that estimations using average prices are biased towards -1. This casts doubt on the usage of average prices as the preferred price measure.…”

Section: Panel Estimation Resultssupporting

confidence: 88%

“…This issue 3 is highly relevant for our analysis, as the predominant pricing model in Germany's retail market for electricity includes two components: a monthly fixed fee and a constant marginal price per kilowatt-hour (kWh). While Baker et al (1989) claim that the bias due to fixed fees is small, Taylor et al (2004) argue that large magnitudes of price elasticity estimates, as well as good model fits, are just statistical artifacts of the usage of the average price p a as price measure, with the average price being defined as follows:…”

Section: Findings From the Literaturementioning

confidence: 99%

“…Ignoring this fact in estimating demand responses may result in biased elasticity estimates. Further obstacles to consistently estimating demand elasticities emerge from the prevalence of tariffs that include a fixed fee, as this would lead to endogeneity bias (Taylor et al, 2004). This kind of tariffs is standard in numerous retail markets, such as telecommunication, natural gas and electricity markets.…”

Section: Introductionmentioning

confidence: 99%

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Switching on Electricity Demand Response: Evidence for German Households

Kussel

2016

SSRN Journal

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Empirical evidence on the response of German households to electricity price changes is sparse. Using panel data originating from Germany's Residential Energy Consumption Survey (GRECS), we fill this void by employing an instrumental variable approach to cope with the endogeneity of the consumers' tariff choice. By additionally exploiting our information on the households' knowledge about power prices, we also employ an Endogenous Switching Regression Model to estimate price elasticities for two groups of households, finding that only those households that are informed about prices are sensitive to price changes, whereas the electricity demand of uninformed households is entirely price-inelastic.

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Section: Panel Estimation Resultssupporting

confidence: 88%

Section: Findings From the Literaturementioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Switching on Electricity Demand Response: Evidence for German Households

Kussel

2016

SSRN Journal

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“…The empirical evidence for whether agents respond to marginal rather than average prices appears to be mixed (see for example Taylor 2004 andHowe 1998), while estimates for price elasticities tend to be larger for average cost pricing than for marginal cost pricing (e.g. Dalhuisen et al 2003 …”

Section: "Independent Variables"mentioning

confidence: 99%

Determinants of residential water demand in Germany

Schleich

Hillenbrand

2009

Ecological Economics

280

193

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. In this paper we econometrically analyze the impact of several economic, environmental and social determinants for the average per capita demand for water and sewage in about 600 water supply areas in Germany. Besides prices, income and household size, we also consider the effects of population age, the share of wells, and rainfall and temperature during the summer months on water demand. We also attempt to explain regional differences in per capita residential water consumption, which is currently about 30 % lower in the new federal states than in the old states. Our estimate for the price elasticity of -0.229 suggests that the response of residential water demand in Germany is rather inelastic, but no significant difference could be found between both regions. In contrast, the income elasticity in the new states is found to be 0.685 which is more than double that of the old states. Differences in prices and income alone explain the largest part of the current gap in residential water use between the two regions. Our results further suggest that household size, the share of wells and summer rainfall have a negative impact on water demand. In contrast, higher age appears to be associated with higher water use. We also find (weak) evidence for an impact of rainfall but not of temperature on residential water use. Our findings imply that future research should include analyses of household-level data to further explore the effects of socio-economic determinants, and analyses of panel data to adequately study the effects of climate change on residential water use. Terms of use: Documents in

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“…But some studies revealed more complicated behaviours: a research conducted in Denton (Texas) between 1976 and 1985 on 101 households (Nieswiadomy and Molina, 1991, Nieswiadomy, 1992, Taylor, et al, 2004 showed that behaviours are different if block rates are increasing or declining. Water consumers seem to be sensitive to marginal price when block rates increase, and to average price when they decrease.…”

Section: Households Sensitivity To Water Pricing Structurementioning

confidence: 99%

Analysing the Diversity of Water Pricing Structures: The Case of France

Montginoul

2006

Water Resour Manage

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This paper presents the results of a 2003 national survey of urban water pricing structure implemented by 429 district level water utilities. After providing some background elements on the diversity of existing water pricing structures, the paper shows how each structure can be used to achieve different management objectives (water allocation efficiency, costs recovery, and equity). It then describes the structures adopted by French water utilities, showing that flat rate are rarely adopted; declining blocks frequently used; and increasing blocks pricing which should be used to promote water use efficiency remain extremely rare. A statistical clustering is then conducted and a typology of situations elaborated. The paper concludes with highlighting that current pricing structures are influenced by past practices and that the dominant objective of water utilities is to cover costs

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Alternate Price Specifications for Estimating Residential Water Demand with Fixed Fees

Cited by 47 publications

References 30 publications

Switching on Electricity Demand Response: Evidence for German Households

Switching on Electricity Demand Response: Evidence for German Households

Determinants of residential water demand in Germany

Analysing the Diversity of Water Pricing Structures: The Case of France

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