Do Residential Water Consumers React to Price Increases? Evidence from a Natural Experiment in Santa Cruz
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.
water, demand, price increase, natural experiment, affordability
Nataraj, Shanthi. 2007. "Do Residential Water Consumers React to Price Increases? Evidence from a Natural Experiment in Santa Cruz." ARE Update 10(3): 9-11. University of California Giannini Foundation of Agricultural Economics.