Residential Demand for Water in a Nature Reserve of Mexico: Evidence of Effects of Perceived Price

Abstract

Abstract:The purpose of this paper is to provide empirical evidence to water policy-makers and the evaluation of the application of economic instruments such as price and other factors affecting demand, they contribute to improved decision-making around water management in the Biosphere Reserve El Vizcaino, Mexico. It was estimated a dynamic function with average price specification and other price perception specification. The findings show that consumers react to average price perceived and not the marginal price; long-run price elasticity is higher than short-run and both elasticities are inelastic. Elasticities inelastic with rising prices generate high incomes to improve water planning, supply quality and expand service coverage. The results suggest that the level of knowledge of users on the price is key to take into account restructuring rates in a scenario where the consumer has asymmetric information and themselves achieve goals of economic efficiency, social equity and environmental sustainability.