Consumers' preferences and derived willingness-to-pay for water supply safety improvement: The analysis of pricing and incentive strategies

Abstract

With increasing water supply accidents and higher water demand, urban water supply safety (WSS) remains a crucial public policy issue in developing countries. The purpose of this paper is to investigate consumers' willingness-to-pay (WTP) and their preferences to improve WSS in China, to support governments in water regulation policy design and water providers in investment-decisions. A discrete choice experiment method with the consideration of not only attributes of WSS but also attitudinal and demographic variables have been adopted to assess consumers' WTP and preferences for WSS improvement. The results show that Chinese urban residents are willing to pay a significantly higher price for improved WSS. Demonstrated marginal mean WTP for the change of the attributes range from 0.18 RMB/m3 (0.03 USD/m3) (1 RMB was around 0.154 USD in 2016) for decreased water supply interruption to 2.33 Yuan RMB/m3 (0.35 USD/m3) for improved drinking water quality. Investments in water processing facilities and water distribution networks should come first. Cross-subsidy concerning different developing districts is the most efficient policy instrument. The study contributes to the recent literature not only by introducing attitudinal variables in choice experiment survey in water supply field, but also by revealing the correlation of choice modeling applications in WSS improvement programs.