WRRCTR No.167 Water Pricing, Conservation, and Urban Water Management

Abstract

The potential for using water pricing was investigated as a tool to promote conservation efforts of the water supplies of Oahu. Traditional approaches, in Honolulu as elsewhere in the United States, to an impending long-term shortage of water relative to demand emphasize augmenting the supply of water, on the implicit ground that consumers "need" certain quantities, whatever the price. A survey of Honolulu single-family residential customers of the Honolulu Board of Water Supply was conducted in the spring of 1983. Data generated in this survey allow the specification and testing of a fairly traditional economic model of water demand. Results of this model indicate that marginal price, household income, and rainfall all significantly affect the quantity of water demanded by Honolulu residents. Price, in particular, evidently has a low but non-zero elasticity, indicating that pricing policy will indeed serve as a tool in attempts to promote water conservation and thus lengthen the viability of conventional and less expensive water sources on Oahu.