Estimating household demand using revealed and contingent behaviours: Evidence from Vietnam

Abstract

This article estimates the water demand of households using (1) municipal water exclusively and (2) municipal water and household well water in the capital city of Dak Lak Province in Vietnam. Household water demands are estimated using a panel data set formed by pooling household records of metered municipal water consumption and their stated preferences for water consumption contingent on hypothetical water prices. Estimates show that households using municipal water exclusively have very price inelastic demand. Households using municipal and household well water have more price elastic, but still inelastic, simultaneous water demand and treat municipal water and household well water as substitutes. Household water consumption is influenced by household water storage and supply infrastructure, income, and socioeconomic attributes. The demand estimates are used to forecast municipal water consumption by households in Buon Ma Thuot following an increase to the municipal water tariff to forecast the municipal water supply company's revenue stream following a tariff increase and to estimate the consumer surplus loss resulting from municipal water supply shortages.