Intervention(s)
The proposed research will take place in Livingstone, Zambia, a city of around 140,000 located near Victoria Falls. The research partner, the Southern Water and Sewerage Company (SWSC), serves around 16,000 residential customers with metered household water connections. Like many urban services around the world, water is billed on an increasing block tariff, with three price tiers (kinks at 6 and 20 cubic meters). Analysis of historical billing data shared by SWSC indicates that consumption spans all three price tiers and that consumption varies from month to month at the customer level. Customers receive monthly bills based on consumption on each of the tiers. Our pilot phase confirms that customers have a low level of awareness of their water price, their consumption and how their bill is calculated. This lack of awareness undermines the price incentive that the increasing tariff is intended to deliver. This lack of awareness also creates a research opportunity. Providing selected households with accurate information about their marginal prices serves as a shock to their price beliefs. Piloting of how to frame price information suggests that describing price as the cost of running the tap for a fixed period of time is most salient to households.
The proposed intervention is simple: we will provide households with accurate information about marginal price and observe their consumption response as measured by SWSC billing records. Analysis will rely both on administrative records from SWSC and on original data collected through surveys conducted by IPA.
Study sample
We will study the water consumption of households in Livingstone, all of which have been on metered water accounts for at least one year, have a currently well-functioning meter and are cohabiting or married. Households will be selected using existing billing records and a pre-screening visit. Based on the pilots from June-September 2014, roughly 35% of the households visited for screening met these criteria and were eligible for inclusion in our sample. Among eligible households, the modal age group for husbands and wives in the pilot sample was 31-40 years; the modal educational attainment was some college (post-secondary diploma or certificate) for men and Grade 12 (secondary schooling) for women.
Data collection and price variation
A single survey visit will be used to collect household-specific information and to provide salient price information to a sub-sample of households. The data collection and intervention consists of three parts:
1) Beliefs about water prices: Both the male and female heads of household will be asked about their beliefs about water prices. They will be asked both to state the marginal price (described in terms of "running a tap for normal household use”) and their confidence around that estimate. We refined elicitation of price beliefs during piloting. SWSC measures water usage in cubic meters, which is a unit of measurement that is hard for most users to translate into regular usage decisions. We piloted a number of different ways to elicit price beliefs, before settling on a framing that was straightforward for respondents. We ask, “Suppose you wanted to save K. 10 on your monthly bill. Then by how many minutes would your household as a whole have to reduce the use of the tap each day? Think about running the tap at a normal pressure, as you would for typical daily activities.” While the correct answer for most households in the “middle” pricing tier is 13 minutes, the average belief from the pilots was about 23 minutes, with responses ranging from 2 minutes to 60 minutes.
2) Household survey: Male and female household heads will be interviewed together and separated for a subset of questions and incentivized games. Together, they will be asked a series of questions about household demographics, income and water usage. Questions about income and water consuming durables will help characterize one dimension of heterogeneity in price sensitivity across households. Separately, they will be asked about the water usage decisions of each member of the household including themselves. Comparing answers about own and other's water usage across spouses will reveal how well informed household members are about the usage decisions made by others. In addition to standard survey measures, the male and female household heads will be asked to play two simple incentivized games that will be used to measure cooperation within the household. A measure of altruism toward the environment will serve as a control. These measures will be used to characterize the second dimension of heterogeneity. The survey and incentivized games were refined during piloting. In a modified dictator game, played between spouses, 25% of the husbands and 15% of wives sent their full endowment to their spouse, knowing that it would be doubled if that game were selected for implementation. On average, husbands sent 65% of their endowment to their wives and wives sent 45% of their endowment to their husbands. Controlling for gender, we find that the share of the endowment sent to the spouse is strongly correlated with other measures of household coordination such as whether the respondent says they regularly make plans with their spouse and whether they find it difficult to hide income from their spouse.
3) Price information: Following completion of the household survey, respondents will be given information about the true price of water that they face. Using the average across recent months, individuals will be told their expected marginal price in the coming month, again using easy to understand language (“running the tap”). To ensure the salience of the intervention, households will also be provided with written materials describing their marginal water price. A control group will complete parts (1) and (2) of the survey but will not receive any price information.
To investigate consumption decisions, we will collect billing data from SWSC for the months following the household data collection and price information intervention.