Privately Operated Water Utilities, Municipal Price Negotiation, and Estimation of Residential Water Demand: The Case of France

This paper addresses the issue of price negotiation between a municipality and a private water utility operator, and its implications for residential water demand estimation. We use appropriate econometric procedures to estimate a water demand equation on a panel of French municipalities. We find evidence that negotiated water price depends on municipality's characteristics, causing endogeneity of price in the demand equation. The impact of average household income, housing, and system features such as metering is investigated both on municipal consumption and price. Estimated price and income elasticities are significant and close to previous household level studies.