| Sumario: | The lengthy literature on residential demand for water service has focused on the model specification and estimation issues arising from block rate pricing of water services. A study investigated another approach to the specification of the water demand model under block rate pricing—the discrete/continuous (D/C) choice model. A set of household-level panel data for Denton, Texas, in the summer months in each year from 1981 to 1985, drawn from a previously published study, were used for the empirical analysis. In a striking result, the D/C choice model was found to produce price elasticity estimates that are much more elastic than prior results based on regression models where the discrete choice is not explicitly modeled. The D/C choice model responds to a frequent criticism by water utility managers of econometric studies of residential water demand by allowing directly for economic and noneconomic influences in a model that is utility theoretic.
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