The proper specification of price in the demand for water in Tucson, Arizona: A case study
AdvisorCory, Dennis C.
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PublisherThe University of Arizona.
RightsCopyright © is held by the author. Digital access to this material is made possible by the University Libraries, University of Arizona. Further transmission, reproduction or presentation (such as public display or performance) of protected items is prohibited except with permission of the author.
AbstractGiven Tucson Water's physical supply and institutional constraints and the utilities expressed interest in becoming a more efficient operation, rate schedules may be a most important management tool. A rate schedule based on consumer's true marginal willingness to pay expressed in accurate demand estimation would provide such a tool. This work examines the practical applicability of a model developed by James Opaluch for the Tucson area using data from a random sample of 46 single family households. The model allows for the relaxation of classical assumption that consumers have perfect information about the goods and services they purchase. It provides empirical evidence relating to the price and difference model as it relates to theoretic subsidization inherent in block rate structures and examines the effectiveness of the current increasing block rate in regards to consumer's perception of price elasticities.