Price and non-price influence in urban water conservatio

The 1987-1992 California drought caused most urban water agencies to adopt policies to reduce consumption in their service areas. In this work we describe the conservation programs utilized by three water agencies located in the San Francisco Bay Area. We analyze consumption and conservation behavior for these districts utilizing aggregate panel data, and we discuss a methodological framework for analyzing the effectiveness of policy management tools in inducing water conservation and combating the drought.;In Chapter 2 a link is established between the introduction of conservation programs by the water agency managers and the decline in consumption observed during the drought.;In Chapter 3 a basic theoretical model of residential water consumption that adequately represents consumer behavior when facing a nonlinear budget constraint is developed. The theoretical model for an individual consumer is adapted to yield an aggregate model that essentially preserves the structure of the demand function for the individual. The model is used to study the influence of prices and nonprice conservation programs on consumption and conservation behavior in the three water districts in the San Francisco Bay Area. The empirical results show that pricing can be an effective tool in reducing water consumption. We found that pricing policies as well as conservation programs are more effective under certain states. Pricing policies influence consumption during non-rainy months (summer and parts of spring and fall in the Bay area), whereas they are less significant in winter. Our results also show price policy to be effective in combating the drought. The influence price has on consumption was shown to be greater in periods of drought.;In chapter 4 we utilize Maximum Entropy techniques to recover parameters when faced with a co-determination of prices and quantities arising from the use of block pricing structures. We estimated two different demand systems. The demand systems differed depending primarily on whether an increasing block rate or a flat rate was used. The results show that increasing block prices induce greater conservation behavior than flat rates.;The three water districts analyzed in this work achieved impressive reduction in water use from their customers, about a 30% decline in 1991 from 1987 levels. They managed this by a combination of pricing and conservation programs. The experienced shared by water utility managers of the Bay Area during the drought shows that using a combination of market and non-market policies to combat droughts can successfully induce conservation behavior from their customers.