Do Residential Water Consumers React to Price Increases? Evidence from a Natural Experiment in Santa Cruz

Nataraj, Shanthi

from ARE Update Vol. 10, No. 3, Jan/Feb, 2007

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Abstract

Using a “natural experiment” from the city of Santa Cruz, California, we find that a 100 percent increase in the marginal price of water resulted in a 15-25 percent decrease in demand among high-use consumers. Our results suggest that price can be an effective water demand management tool, and that increasing-block pricing can successfully encourage water conservation among high-use households while maintaining overall affordability.

Keywords

water, demand, price increase, natural experiment, affordability

Citation

Nataraj, Shanthi. "Do Residential Water Consumers React to Price Increases? Evidence from a Natural Experiment in Santa Cruz." ARE Update 10(3)(2007):9-11. University of California Giannini Foundation of Agricultural Economics.
http://giannini.ucop.edu/publications/are-update/issues/2007/10/3/do-residential-water-cons/