| Summary: | Shin's (1985) technique was used to determine if the price perception variable in a water demand function is different under decreasing and increasing rate structures. The data set comprised a random sample of 101 individual consumers' monthly water use records from Denton, Texas, for the summer months of 1976-80 for the decreasing block rate period and 1981-85 for the increasing block rate period. It seems that the residential water consumer is responding to marginal price when faced with increasing block rate structures and is responding to average price when faced with decreasing block rates. The confidence intervals for the estimated price perception parameter are high, however. If real water and sewer water rates rise, thereby increasing the expected marginal benefit of search, consumers can be expected to add to their knowledge about the schedule. New price perception results may arise.
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