Cardon Research Papers
in Agricultural and Resource Economics
Research
Paper
2014-03
Fall
2014
Stratifying the Staircase: Residential Water
User Segmentation Under Increasing Block
Rate Pricing Structure
Ronald J. Klawitter
The University of Arizona
Bonnie G. Colby
The University of Arizona
Gary D. Thompson
The University of Arizona
The University of
Arizona is an equal
opportunity, affirmative action institution.
The University does
not discriminate on
the basis of race, color,
religion, sex, national
origin, age, disability, veteran status, or
sexual orientation
in its programs and
activities.
Department of Agricultural and Resource Economics
College of Agriculture and Life Sciences
The University of Arizona
This paper is available online at http://ag.arizona.edu/arec/pubs/researchpapers.html
Copyright ©2014 by the author(s). All rights reserved. Readers may make verbatim copies of this document
for noncommercial purposes by any means, provided that this copyright notice appears on all such copies.
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3
2.75
2.5
Million CCF
2.25
2
1.75
1.5
1.25
1
0.75
1985
1988
1991
1994
1997
2000
Year
2003
2006
2009
2012
22
20
18
CCF
16
14
12
10
8
6
1985
1988
1991
1994
1997
2000
Year
2003
2006
2009
2012
Residential Water
Demand Models
Structural
Models
Reduced
Form Models
Time Series
• Mostly Aggregated Use
Nordin Income Specification
•
•
•
Nordin
Taylor
Nieswiadomy & Molina
Regression Discontinuity
• Nataraj & Hanneman
Cross-Sectional
• Household Level Data
Panel Models
Discrete-Continuous Choice
•
•
•
Hausman
Hewitt & Hanneman
Olmstead, Hanneman & Stavins
• Time Series & Cross-Sectional
Random Effects
•
Accounts for cross-sectional
heterogeneity
Fixed Effects
•
No coefficient estimates for time
invariant explanatory variables
PDF Gamma Family Distribution (α=1.03,β=11.1)
0.07
0.06
Probability
0.05
0.04
0.03
Block 1
0.02
Block 4
0.01
Block 2
Block 3
0
0
15
30
CCF
45
0
Block 1
Block 2
block 3
Billing Month
Block 4
Apr-11
Mar-11
Feb-11
Jan-11
Dec-10
Nov-10
Oct-10
Sep-10
Aug-10
Jul-10
Jun-10
May-10
Apr-10
Mar-10
Feb-10
Jan-10
Dec-09
Nov-09
Oct-09
Sep-09
Aug-09
Jul-09
Jun-09
May-09
Apr-09
Mar-09
Feb-09
Jan-09
Dec-08
Nov-08
Oct-08
Sep-08
Aug-08
Jul-08
Jun-08
May-08
Apr-08
Mar-08
Feb-08
Jan-08
Dec-07
Nov-07
Oct-07
Sep-07
Aug-07
Jul-07
Use in CCF
60
50
40
30
20
10
$11
$10
$9
$8
Price Per CCF
$7
$6
$5
$4
$3
$2
$1
$0
0
15
Jul 2007- Jun 2008
Usage (CCF)
Jul 2008- Jun 2009
30
Jul 2009-Jun 2010
45
Jul 2010 - Jun 2011
$9
$8
$7
Price Per CCF
$6
$5
$4
$3
$2
$1
$0
0
15
30
45
CCF
AP 2007-2008
AP 2008-2009
AP 2009-2010
AP 2010-2011
$90,000
$80,000
Income
$70,000
$60,000
$50,000
$40,000
$30,000
2007
Block 1 Seg.
2008
Block 2 Seg.
2009
2010
Block 3 Seg.
2011
Block 4 Seg.
$120
$100
Average Price per CCF
$80
$60
$40
$20
$0
0
5
10
15
20
25
30
35
CCF
Block1
Block2
Block3
Block4
40
45
Average Price per CCF
0
$0
$5
$10
$15
-0.1
Price Elasticity of Demand
-0.2
-0.3
-0.4
-0.5
-0.6
-0.7
Seg 1 Elasticity
Seg 1 95% Confidence
Seg 2 Elasticity
Seg 2 95% Confidence
Seg 3 Elasticity
Seg 3 95% Confidence
Seg 4 Elasticity
Seg 4 95% Confidence
0.9
0.9
0.8
Income Elasticity
Income Elasticity
0.8
0.7
0.6
0.5
0.5
2008
2009
2010
0.3
2007
2011
2008
2009
Year
Year
(a)
(b)
0.9
0.9
0.8
0.8
2010
2011
Income Elasticity
Income Elasticity
0.6
0.4
0.4
0.3
2007
0.7
0.7
0.7
0.6
0.6
0.5
0.5
0.4
0.4
0.3
2007
0.3
2007
2008
2009
2010
2011
2008
2009
Year
Year
(c)
(d)
2010
Seg 1 Inc Elasticity
Seg 1 95% Confidence
Seg 2 Inc Elasticity
Seg 2 95% Confidence
Seg 3 Inc Elasticity
Seg 3 95% Confidence
Seg 4 Inc Elasticity
Seg 4 95% Confidence
2011