Using household-level panel data from Tucson, Arizona, and a unique set of highly disaggregated control variables, we estimate residential demand for water via a Stone-Geary specification. The Stone-Geary functional form allows price elasticity of demand to vary with quantity consumed, price, and income and enables estimation of a threshold level of consumption below which demand is considered perfectly price inelastic. An encompassing test of consumer price response reveals evidence favoring a lagged average price specification rather than one using lagged marginal price. The estimated model also finds substantial seasonal variation in price elasticity and declining consumer price responsiveness.
ASJC Scopus subject areas
- Environmental Science (miscellaneous)
- Economics and Econometrics