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This paper presents a model of residential water demand based on the Stone–Geary utility function, which explicitly considers a threshold of water that is insensitive to price and a quantity that can adapt instantaneously to price changes. First, the threshold is assumed constant, being then allowed to vary according to past levels of consumption, a proxy for households' water-using equipment and habits. A measure of the depreciation rate of habits is derived and the effectiveness of price and non-price conservation measures are compared. The results provide useful policy recommendations for the studied case of Seville (Spain).
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Martı́nez-Espiñeira et al. (2004) studied this question.
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