The objectives of this study were to estimate an aggregate price elasticity of demand for municipal water in Saudi Arabia, and to analyze the welfare impact of raising municipal water tariff. The study utilized available aggregated data (MWE, 1999–2008), and regression techniques to specify water demand functions within the frame of increasing block tariff applied in Saudi Arabia. The estimated price elasticity of municipal water demand was about –0.39. The impact of an assumed 33% raise of municipal water tariff was predicted to save about 11.121 cubic meter per household per month, which would lead to a total annual saving for about 128.544 million cubic meter. The percentage increase of average equilibrium price would reach 12.7%. Therefore, the percentage decrease in consumer surplus per household amounts to 9.43%.
- increasing block
- municipal water
- price elasticity
- welfare analysis
- First received 16 September 2015.
- Accepted in revised form 24 March 2016.
- © IWA Publishing 2016