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Water 2016, 8(10), 428; doi:10.3390/w8100428

Residential Water Demand in a Mexican Biosphere Reserve: Evidence of the Effects of Perceived Price

1
Centro de Investigaciones Biológicas del Noroeste, Instituto Politecnico Nacional 195, Colonia Playa Palo de Santa Rita, 23096 La Paz, B.C.S., Mexico
2
Department of Economics, Universidad Autónoma de Baja California Sur, Carretera al Sur Km 5.5, 23080 La Paz, B.C.S., Mexico
*
Author to whom correspondence should be addressed.
Academic Editor: Jay R. Lund
Received: 11 August 2016 / Revised: 14 September 2016 / Accepted: 21 September 2016 / Published: 29 September 2016
View Full-Text   |   Download PDF [470 KB, uploaded 29 September 2016]   |  

Abstract

The purpose of this paper is to provide empirical evidence for policy-makers of water management, evaluate the applicability of economic variables such as price and other factors that affect demand, and determine the impact thereof on decision-making surrounding water management in the El Vizcaino Biosphere Reserve in Mexico. We estimated a dynamic function with an average price specification, as well as price perception specification. Findings demonstrated that consumers tend to react to perceived average price but not to the marginal price. Furthermore, long-term price elasticity was found to be higher than short-term elasticity, and both elasticities were found to be inelastic. Inelastic elasticities, coupled with rising prices, generate substantial revenues with which to improve water planning and supply quality and to expand service coverage. The results suggest that users’ level of knowledge surrounding price is a key factor to take into account when restructuring rates, especially in situations where consumers do not readily possess the necessary information about their rate structure and usage within a given billing period. Furthermore, the results can help water management policy-makers to achieve goals of economic efficiency, social equity, and environmental sustainability. View Full-Text
Keywords: lagged consumption; dynamic function; water management; average price; marginal price lagged consumption; dynamic function; water management; average price; marginal price
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This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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MDPI and ACS Style

Almendarez-Hernández, M.A.; Avilés Polanco, G.; Hernández Trejo, V.; Ortega-Rubio, A.; Beltrán Morales, L.F. Residential Water Demand in a Mexican Biosphere Reserve: Evidence of the Effects of Perceived Price. Water 2016, 8, 428.

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