Evaluation of Price Elasticity for Domestic Water Demand using Willingness to Pay: Case Study - Mandalay
This paper intends to find the price elasticity of domestic water demand for Mandalay using willingness to pay. The study was conducted to 286 sampled households in Mandalay using questionnaire survey. Contingent valuation method is used in questionnaire survey and the value elicitation method is used as a closed ended format questionnaire and open ended follow up questionnaire. The average monthly household's consumption of domestic water was also estimated for the sampled households. Demand curve is constructed by using willingness to pay values versus average monthly water consumption of households. The price elasticity of demand is determined by using arc elasticity method. In this method, value of price elasticity is estimated by mid-point formula. In segment 5, the unit elasticity 1.11 is found and the price values are the upper price 233 MMK/m3 and the lower price 195MMK/m3. Factors affecting to the willingness to pay was analysed by using Linear Regression Model. The mean willingness to pay value is 252 MMK/m3 from linear regression analysis. All the values of price are well above the current water tariff 85 MMK/m3.
Keywords - Price elasticity, willingness to pay, arc elasticity method, linear regression, contingent valuation method, elicitation method and domestic water demand.