Water bill estimation when price is cryptic: experience from Windhoek, Namibia

Abstract

For water policy to be effective, policy makers must know how water users perceive and respond to changes in water prices. However, it is not uncommon for water prices faced by consumers to be unclear. In Windhoek, Namibia, the marginal and average water price is difficult to calculate from the information provided in users' utility bills. This paper applies a hedonic pricing approach to investigate price perceptions of water users in a setting with cryptic price information. Using self-reported water charges as the dependent variable, the pricing model utilises reported utility characteristics and other factors that may affect perceived price. Low-income standpipe water users report a weighted average monthly charges of N$24.68, whereas users in high income segments report N$521.34. This reflects differences in service levels, possible subsidies to low-income users and potential errors in respondents' understanding of their water price. Average price per litre (N$11.78 for the low-use segment; N$1.89 for the highest segment of Tier 1 water use) tends to be perceived as higher by those with lower water use even though average prices in the relevant range should generally be identical.