| Sumario: | A study was conducted to quantify the impact of a rate structure with a fixed charge and a free allowance on residential water consumption. The demand function for residential water in Adelaide, Australia, was estimated by regressing water demand on price, income, socioeconomic variables, and physical variables using panel data obtained from a large sample of households for the period 1978/79 to 1991/92. Regression analysis was then applied to a number of specified models. Results indicate that water consumption above the free allowance, being sensitive to price, responds less to social and climatic factors than consumption below the free allowance. In addition, results show that an increase in 10 percent in the real marginal price would result in a reduction in demand in the long run of up to 8 percent and an increase in revenue of at least 1 percent; that a 10 percent reduction in household size would lead to an decrease of up to 2 percent in demand in the long run; and that a 10 percent increase in real property value would lead to an increase in demand of up to 4 percent. The implications of these results are discussed.
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