Conference Agenda

Disruptions in water supply have become more frequent due to increased demands and drought risk. However, evidence is limited on how within-city reliability shocks interact with increasing-block tariffs (IBTs) and the rising use of decentralized self-supply through private wells in developing countries. We quantify the responses of network demand and private-well adoption to supply-failure exposure under an IBT, controlling for neighborhood and socioeconomic characteristics, and observe how housing type mediates adaptation and impacts equity and utility revenue. We assembled a georeferenced micro-database for a drought-prone city in São Paulo (Brazil), linking 148,000 residential connections with housing typologies, through 2022 census microdata. We adopt a structural equation model to evaluate the substitution effect of using a well on tap water consumption and estimate that private wells displace 84-94\% of metered network consumption. We also evaluate the price response using 2021-2023 monthly billing panels, estimating demand models with census-tract and month-year fixed effects and lagged average prices. Demand is price-inelastic but responsive (elasticity of -0.35) and displays a steep income gradient: elasticities are around -0.6 for low-income groups and become indistinguishable from zero in higher-income settings. The results point to an adverse selection dynamic, as the settings able to coordinate collective well use are also higher-demand customers facing higher prices under the IBT, weakening conservation incentives and cross-subsidies while shifting coping costs toward households with fewer supply alternatives. The findings underscore the need to jointly design reliability investments, tariff structures, and groundwater self-supply management instruments to protect utility cost recovery and equity in water-stressed cities. (FAPESP 2025/11358-0, 2022/15693-0, 2020/15434-0)