Estimation of the effects of price and billing frequency on household water demand using a panel of Wisconsin municipalities

A demand function of residential water consumption is developed from a 1997 to 2006 panel of 200 Wisconsin water utilities. A double-log functional form is assumed and parameters are estimated using a random effects model. The results suggest that the price is inelastic yet negative and statistically significant and this elasticity response grows stronger as the marginal price level is increased. Additionally, the model reveals water savings due to monthly billing and also the annual water savings from technology adoption.