On December 20, 2018, h. 14.00-15.00, Prof. María Pérez-Urdiales (University of California Riverside) will give a talk on “Learning to live within your (water) budget: evidence from allocation-based rates”.
As allocation-based rates become more widely adopted in the residential water sector, it is important to determine behavioral responses to this relatively complex tariff structure. Of particular interest is the question of whether consumers interpret the water budget as a target for efficient water use, or if they simply respond to the increasing block design. In this paper we exploit a natural experiment created when allocation-based rates were adopted by a southern California water district, and implement a regression-discontinuity design that allows us to identify households with inefficient water use as a treatment group. To examine the effect of the tariff on inefficient consumers, we use a difference-in-differences methodology that explicitly allows for gradual adaptation to the new tariff. We find evidence of heterogeneous customer responses, and policy-induced behavioral changes that imply customers are paying attention to the efficiency signal provided by the water budget.
Keywords: Water Demand; Allocation-based Rates; Convergence; Regression Discontinuity Design, Difference-in-differences; Latent Class Models.