Defensive Investment in Municipal Water Hardness Reduction

Abstract

Household willingness to pay (WTP) for reductions in water hardness was estimated using a defensive investment framework. Using total dissolved solids data observed in municipal water supplies in combination with product-by-store level point-of-sale scanner data on consumable water softening product sales, we reveal preference estimates of WTP for water hardness reduction and quality control. Using instrumental variable regressions, we show that household marginal WTP increases as the observed total dissolved solids in municipal water increases. Estimations show that on average a household is willing to pay approximately $12 annually to reduce municipal water hardness, which is around 4% of the average annual water utility bill in the United States. Aggregated county WTP estimates vary geographically. Households have a nonnegligible WTP for water hardness reduction, which has important policy implications for optimal water hardness management by municipal water authorities and those policies aimed to target salinity management within surface and subsurface water supplies. Particularly, this paper informs municipal water managers of the demand side of water hardness issues and that desalination can be a solution to solve water hardness issues in some areas but not everywhere.