Estimating the price elasticity of demand for payment of Isfahan Municipality renovation fee slips in the same period 1404 and 1405

mostafa najari¹ laaya vaez² soheila mohamadi³

1) Head of Revenue Follow-up Department of Isfahan Municipality
2) Responsible for providing financial resources for Isfahan Municipality
3) Isfahan Municipality Revenue Expert

IOI Code : ABKD-ABKGGE
Publication : Fourth International Conference on applied researches in civil engineering, architecture and urban planning (icarcau.com)
Abstract :
    Estimation of the Price Elasticity of Payment Demand for Urban Renewal Charge Bills in Isfahan Municipality: A Comparative Analysis of 2025 and 2026 Price elasticity of demand is one of the central concepts in economic analysis of behavioral responses to changes in prices. Its application to municipal charges, however, requires methodological caution because municipal charges are not conventional market goods. The relevant behavioral decision is whether a citizen settles a financial obligation represented by a municipal bill. Accordingly, this study operationalizes price elasticity as the responsiveness of the number of paid bills to changes in the effective amount payable per bill. The purpose of this study is to estimate the price elasticity of payment demand for urban renewal charge bills in Isfahan Municipality during comparable periods of 2025 and 2026 and to interpret the estimated elasticity in the context of a 30 percent discount policy. The bill is treated as the unit of analysis and includes urban renewal charges, waste service charges, rail transportation charges, and arrears. These components are not separately introduced into the demand function. During the first quarter of 2026, the tariff basis remained at the 2025 level while a 30 percent discount was applied to the effective bill amount. The number of paid bills increased from 25,666 in 2025 to 46,196 in 2026, representing approximately 80 percent growth. Total collections increased from 938 billion rials to 2,397 billion rials, equivalent to a 156 percent increase. The effective payment amount was normalized to an index of 100 before the discount and 70 after the 30 percent discount. The resulting linear payment-demand function is: Q = 94099.33 - 684.33P The point elasticity is estimated at -2.666 at the initial price index and -1.037 at the post-discount index. The arc elasticity between the two observed states is approximately -1.619. Thus, payment demand is elastic throughout the observed interval. Nevertheless, because municipal bills include arrears and several components other than current urban renewal charges, the estimated elasticity should not be interpreted as the pure price elasticity of current urban renewal charges. The revenue function derived from the estimated demand function implies a revenue-maximizing effective price index of approximately 68.75, corresponding to a discount of approximately 31.25 percent. Given the limited number of aggregate observations and the presence of arrears, this value should be interpreted as an initial policy estimate rather than a definitive structural optimum. Keywords: Price elasticity of demand; municipal charges; urban renewal charges; payment demand; effective bill amount; discount policy; municipal revenue; urban finance; Isfahan Municipality

Keywords : price elasticity of demand renovation fee slip effective payment amount payment behavior discount urban income urban fees urban finance isfahan municipality