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In this paper, we introduce a previously unused instrumental variable to estimate the elasticity of commercial water demand for firms served by a large municipal utility. We then present evidence that firms are more responsive to one-period lagged average price than marginal price. Finally, we find notable differences in elasticity among different categories of businesses. The findings in this paper are particularly important as water utilities consider how to maintain revenue while coping with limited water supplies and increasing commercial demand. (JEL Q31) [ABSTRACT FROM AUTHOR]

Colorado's water supply is under threat due to climate change pressures and population growth, however Colorado has been recognized to have some of the most progressive water conservation programs in the country. Limiting outdoor water consumption is an increasingly popular approach to conserving water in semi-arid cities, yet in order to implement effective water reduction and conservation policies, more utilities and city managers need a firm understanding of the local drivers of outdoor water consumption. This research explores the drivers of outdoor water consumption in a semi-arid, medium-sized Colorado city that is projected to undergo significant population growth. We used a combination of correlation and linear regression analyses to identify the key descriptive variables that predict greater water consumption at the household scale. Some results were specific to the development patterns of this medium-sized city, where outdoor water use increased 7% for each additional mile (1.6 km) a household was located from the historic urban center. Similarly, more expensive homes used more water as well. Surprisingly, households with a higher ratio of vegetation cover to parcel size tended toward less water consumption. This result could be because parcels that are shaded by their tree canopy require less irrigation. We discuss these results to assist city managers and policymakers in creating water-efficient landscapes and provide information that can be leveraged to increase awareness for water conservation in a growing, semi-arid city. [ABSTRACT FROM AUTHOR]