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Promoting Conservation by Managing Residential Outdoor Watering: Evidence from the Truckee Meadows Area in Northern Nevada
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Many water utilities in the US and around the world have implemented days-of-week outdoor watering restrictions (OWRs) to induce conservation and delay costly capacity expansions. To date, economists have primarily focused on two aspects of OWR policies: (i) the overall effectiveness of OWRs compared to an unrestricted baseline, and (ii) the welfare effects of OWRs on consumers. The literature suggests that OWRs can reduce water consumption, and that the effect on welfare may be small. Surprisingly, the existing literature offers no guidance on the optimal implementation of OWRs. This research sheds light on this issue by (i) exploring the impact of outreach campaigns on compliance and therefore consumption, and (ii) exploring how different patterns of weekly watering events effect total and peak consumption. Our findings have important implications for optimal OWR designs and implementation. This dissertation is composed of three separate essays. The first essay presents a theoretical model of water demand in the presence of OWRs, and how conservation campaigns could alter household utility, thus alter demand. Then we provide an empirical analysis of a unique field experiment designed to test the impact of four different conservation letter campaigns on water consumption. We find that conservation campaigns can reduce consumption on non-assigned days, and that the magnitude of the reduction is dependent on the campaign message. We discuss how the results can be incorporated into outreach programs to reduce residential water demand. The second essay investigates the short- and long- run impacts of four conservation letter campaigns on compliance with OWRs. First, we perform cluster analysis on observations of daily household water consumption to identify noncompliance incidents during the summers of 2007 and 2008. We then examine the immediate effects of the campaigns on noncompliance after the letters were mailed in 2007, and compare those to any lingering effects in 2008. All four campaigns significantly reduced noncompliance in 2007. And while the magnitude of the reduction diminished in the 2008, the effects of three campaigns remained significant. There exists considerable uncertainty regarding the optimal number of weekly watering days allowed under OWRs and how the days should be assigned, or the impact of allowing customers to choose their watering days within the weekly quota. The third essay takes a closer look at the relationship between weekly watering days, total weekly consumption, and weekly use peaks using panel data on daily water consumption at the household level. We tackle the multiple econometric challenges of a discrete-continuous, triple equation system with endogenous regressors and unobserved household effects via a full-information hierarchical Bayesian framework. We find that while consumption and peaks generally increase with the number of watering days, households that exhibit weekly flexibility in their choice of watering days have significantly lower use.