RESIDENTIAL DEMAND FOR WATER IN THE CHICAGO METROPOLITAN AREA

This paper provides the first contemporary analysis of residential water demand in humid Northeastern Illinois, in the vicinity of Chicago, and explores seasonal and income-based differentials in the responsiveness of water use to water prices. Using a panel of system-level data for eight water systems and controlling for seasons, weather, incomes, and community characteristics, the analysis yields low estimates of price elasticity of demand for water in line with other studies. Furthermore, price response is greater in summer and less in higher income communities. We suggest that use of seasonal pricing can help mitigate equity issues arising from differential income elasticities while taking advantage of the greater price responsiveness of summertime water use.