Estimating Urban Residential Water-Demand With Increasing Block Prices: The Case of Perth, Western Australia

This study uses panel data at suburb level to estimates the elasticity water demands inPerth, Australia from 1995 to 2005. After deriving the consumer’s water demand under anon-linear budget constraint, we estimate the water demand model, which accounts forhow water (and other purchased goods) is used to satisfy fundamental desires of thehousehold. We have applied the specification of price that provided the correctlyestimated marginal price from the block tariff structure, and employed a maximumlikelihood estimation technique to tackle the endogeneity and heteroskedasticity issues.Our estimation of water demand price elasticities are slightly higher (more elastic) thanprevious study in Perth, but broadly in line with other estimates in the literature.