Drought management, service interruption, and water pricing: Evidence from Hong Kong

Supply shortage is a common problem faced by an urban water supply system. Nonmarket programs are often used to reduce consumption. Using monthly water consumption data collected for Hong Kong for the period 1973–1984, we estimate the effect of service interruption on per capita consumption. The findings show that this effect is statistically significant but relatively small in size. A price increase of 16–35% could have produced the same amount of consumption reduction.