Residential Water Use: Efficiency, Affordability, and Price Elasticity

Authored by Ming-Feng Hung, Bin-Tzong Chie

Date Published: 2013-01

DOI: 10.1007/s11269-012-0185-z

Sponsors: No sponsors listed

Platforms: No platforms listed

Model Documentation: Other Narrative Mathematical description

Model Code URLs: Model code not found

Abstract

In practice, water pricing is the main economic instrument used to discourage the wasteful use of residential water. Owing to considerations of affordability, residential water is systematically underpriced because water is essential for life. Such a low price results in water being used inefficiently. This paper proposes a system that supplements the existing price system with a cap-and-trade measure to reconcile conflicts among the goals of residential water use. It forces all people (independent of income) to be faced with reasonable price signals and to use water efficiently. The poor could, however, gain from trade and afford water. By taking advantage of the agent-based model, a simulation of this system applied to Taipei, Taiwan shows that those with lower income per capita are better off under this system even though the equilibrium price of residential water is higher. The simulated average price elasticity of market demand is -0.449.

Tags

Agent-based model Efficiency Affordability Cap and trade Price elasticity Residential water Water pricing