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Human behavior in the context of water scarcity




Maas, Alexander, author
Goemans, Christopher, advisor
Manning, Dale, advisor
Kroll, Stephan, committee member
Arabi, Mazdak, committee member

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This dissertation in comprised of three chapters which use microeconomic principles and empirics to examine human behavior in the face of water scarcity. Chapter one uses an experiment to investigate the effect of threshold uncertainty on common pool resource (CPR) consumption decisions. Chapter two uses latent class analysis to endogenously identify unique household classes with respect to their water use decisions under various price and weather scenarios. Chapter three directly compares the residential water consumption decisions of households motivated primarily by social and environmental outcomes with households primarily motivated by cost and convenience. The overall goal of my work is to elucidate the behavior and motivation that leads to particular consumption decisions in the presence of water scarcity. Chapter one explicitly models a CPR in which uncertainty around a tipping point—stock level below which the resource is destroyed—can engender two distinct Nash Equilibria (NE), both of which lead to a Tragedy of the Commons. We theoretically and empirically test how differing levels of uncertainty around the location of this tipping point affects individual and group consumption choices. Our results suggest that the presence of uncertainty increases the likelihood that individuals choose the NE consistent with resource destruction (even though it is an inferior NE) and to ignore potential impacts on resource stocks. However, conditional on choosing the superior NE, increased uncertainty does not affect consumption rates in the experiment. In addition, we introduce tax and fine policies and find that they reduce overall consumption rates and the probability that individuals choose to destroy the resource. Chapter 2 and 3, do not explicitly model scarcity, but they examine household water consumption in the arid southwest where water scarcity is a pervasive concern. Both chapters two and three use data from Fort Collins Utilities to investigate household heterogeneity and water consumption decisions. Chapter 2 uses a finite mixture model to endogenously identify distinct water use patterns. Estimated price elasticities are consistent with previous literature and range from -0.1 in the spring for the unresponsive class to -0.8 in the summer for the responsive class. We find significant evidence that households classes exist and can generally be broken into high responsive and low responsive classes. Our results also suggest that changes in precipitation will have little effect on demand, but a 2 degree temperature increase will increase residential water demand throughout the city by approximately 5%. Lastly, chapter two investigates the burden of price increases and weather shocks across household class and income level. We find that the vast majority of water reductions due to price increases come from middle and high income homes. Chapter three is similar to chapter two in motivation, but distinct in methodology. Chapter 3 poses and attempts to answer a simple question: do households primarily motivated by environmental and social (E&S) consideration consume water differently than households motivated primarily by cost and convenience (C&C)? Results strongly indicate that E&S consumers use less water than (C&C) consumers. Results also suggest that E&S motivated households consume significantly more water as temperatures rise. However, there is no statistical difference between E&S and C&C consumers in their responses to changing price and precipitation.


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environmental motivation
water demand
experimental economics


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