A Discrete/Continuous Choice Approach to Residential Water Demand under Block Rate Pricing: Comment

Abstract

The author is replying to critiques of his paper about thediscrete/continuous choice approach to residential water demandunder block rate pricing. Although the assumption that errors aremultiplicative and lognormally distributed was maintained and nottested in the paper, it is estimated that two models with themore common assumptions of linear demand and additive andnormally distributed errors, both with and without a modificationfor nonnegativity. A non-nested model selection test bears outthe fortuitusness of the assumptions. Still, there may beinstances where the additive normal error distribution is moreappropriate and the non-negativity modification to the likeliyoodthat the proposed equation offers will be appropriate in somecases.