Understanding the Residential Water Demand Response to Price Changes: Measuring Price Elasticity with Social Simulations

Abstract

first_pagesettingsOrder Article Reprints Open AccessArticle Understanding the Residential Water Demand Response to Price Changes: Measuring Price Elasticity with Social Simulations by Pol Vidal-Lamolla 1,2,*ORCID,María Molinos-Senante 3,4ORCID andManel Poch 1ORCID 1 LEQUIA, Institute of the Environment, University of Girona, 17004 Girona, Spain 2 Aigües de Barcelona, Empresa Metropolitana de Gestió del Cicle Integral de l’Aigua, General Batet 1-7, 08028 Barcelona, Spain 3 Institute of Sustainable Processes, University of Valladolid, C/Mergelina 4, 47011 Valladolid, Spain 4 Departamento de Ingeniería Química y Tecnología del Medio Ambiente, Universidad de Valladolid, C/Mergelina 4, 47011 Valladolid, Spain * Author to whom correspondence should be addressed. Water 2024, 16(17), 2501; https://doi.org/10.3390/w16172501 Submission received: 16 July 2024 / Revised: 7 August 2024 / Accepted: 17 August 2024 / Published: 3 September 2024 (This article belongs to the Section Urban Water Management) Downloadkeyboard_arrow_down Browse Figures Versions Notes Abstract Water pricing is an economic instrument traditionally used to reduce water demand. However, its effective implementation requires knowledge of the extent to which users reduce water consumption with increasing water prices. The price elasticity of water demand has been estimated using econometric regression, which relies on cross-sectional and time-series water data. As an alternative, we propose the use of agent-based modelling, which does not require reliable historical data on water prices and consumption and enables the simulation of multiple scenarios with different consumer profiles, behaviour profiles and water price changes, thereby allowing comprehensive understanding of price elasticity estimates. To illustrate the potential use of agent-based modelling for the estimation of water demand price elasticity, we performed an empirical application to a residential area in Chile. Price elasticity estimates ranged from −0.0159 to −0.1036 (mean −0.0250), indicating that residential water consumption is inelastic to price changes. This result is consistent with previous findings. Agent-based modelling is an alternative for the ex-ante assessment of the potential effectiveness of water pricing policies intended to reduce residential water demand