Quantity Uncertainty and Demand: Water Smart Readers

Recently, many water and electricity providers are allowing customers to view their consumption in real time. The idea of these programs is, “if people only knew how much water they were using, they would obviously cut back.” One such program has been underway in Aurora, Colorado, since 2005. We investigate the consequences of this program on water demand, as well as the impact on price responsiveness. Two important results are that household consumption may increase given such information due to the nature of the pricing structure, and that households may become much more price responsive.