Leveraging Loss Aversion and Self-Efficacy: The Role of Water Pricing and Risk in Driving Individual Innovation for Sustainable Water Consumption

Abstract

Water scarcity is a growing global challenge, requiring effective management strategies to ensure sustainable water use, particularly in regions like West Dorset, U.K., where rising prices and environmental pressures make sustainable consumption practices essential. This study develops and empirically tests an integrated theoretical framework combining Prospect Theory (PT) and Social Cognitive Theory (SCT) to examine the mechanisms driving household water conservation. Using structural equation modelling on data from 429 residents in West Dorset (response rate 78.3%), we investigated how water pricing (WP) and perceived water risk (PWR) influence sustainable water consumption through individual innovativeness (II) and community engagement (CE), with environmental regulations (ERs) as a moderator. The results revealed significant positive effects of WP and PWR on individual innovativeness, which, in turn, strongly predicted community engagement. The relationship between these factors and sustainable water consumption was significantly moderated by ERs. This study makes three key contributions: Firstly, it empirically validates an integrated PT-SCT framework in water conservation behavior. Secondly, it identifies the crucial mediating role of II in translating price and risk perceptions into community action; and lastly, it demonstrates how regulatory frameworks can enhance or inhibit conservation outcomes. These findings inform policy recommendations for tiered pricing structures, community-based conservation initiatives, and adaptive regulatory frameworks. This study provides a comprehensive model for understanding and promoting sustainable water consumption in water-stressed regions worldwide.