The Demand for Water by Single-Metered and Group-Metered Households

This paper examines water consumption in group-metered households. A utility-maximising model is developed in which the marginal price schedule is approximated by a polynomial function of water consumption. The model is modified to allow for an incentive for group-metered households to consume more water than if they were separately metered. This occurs if households do not expect their own increase in water consumption to be matched by other households sharing the meter, so that part of the marginal cost of water is shifted to other households. Estimates using Western Australian data are, however, unable to detect any significant effect of this kind, perhaps because the price response itself is small.