Pricing Policy Effectiveness is Domestic Water Demand Management

Computations:
Regression
Dependent Variable: lnQ
Independent Variables: lnQ_lag, Dgbt, lnT, ln_MP_IV, ln(AP/MP), Dmo, Dabt, lnNR, Dst, lnL, Dait, , Drt, lnW
Variable Tested Coefficient S.E. Variance
0.756
MP 20 (3.514)
-0.576
AP/MP
(-6.677)
0.215 0.046225
0.086 0.000740
β1 – β2 = 0.756 – (-0.576)
= 1.332
S.D β1-β2 = (Var β1 + Var β2 – 2Cov β1, β2 )½
= 0.230913 21
t* = 1.332/0.230913
t* = 5.768
Conclusion: t* > 2 ; reject Ho.
Conclude that k≠1. Consumers do not respond only to average price.
[Note that a similar test cannot be used for the hypothesis that consumers respond only to MP (k=0). If the
alternate hypothesis (k≠0) is false, it would not imply that consumers do not respond to AP. Average price has
been introduced in the regression equation as a ratio of AP and MP. If the alternate hypothesis is false, we can
only conclude that consumers do not respond to this ratio: a conclusion with little practical significance.]
Details
Coefficients
B SE t Sig.
(Constant) -.588 .287 -2.050 .040
Dmo -.031 .025 -1.235 .217
Dgbt .042 .025 1.719 .086
Drt .002 .024 .090 .929
Dst .047 .023 2.085 .037
Dabt .010 .023 .407 .684
Dait .036 .024 1.457 .145
lnT .156 .030 5.278 .000
lnNR .020 .024 .850 .396
lnW -.010 .011 -.907 .365
lnL .087 .012 7.446 .000
ln_MP_IV .756 .215 3.514 .000
lnAP_MP -.576 .086 -6.677 .000
20 The positive sign of MP coefficient is possibly due to multicollinearity between MP and AP/MP variables.
21
Cov β1, β2 = -rσ 2 /[(1-r 2 )√(Σx 1 2 Σx 2 2 )]
24