AN INVESTIGATION ON MALAYSIA CONSUMER’S WILLINGNESS-TO-PAY FOR WATER USING INCOME AND USE OF GOODS

Abstract

It is quite common for people to under value public goods (like water); mainly because they are often provided for the public to use at the discretion of the government (e.g., with subsidy, discount) unlike other economic goods (like commercial products) offered for buyers at market price by practitioners. In Malaysia, the government subsidizes the price of water for the public to ensure they have easy access to drinking water and affordability. With continued increase of water demand, consumption and wastage, low water tariff is suggested as one of many factors contributing towards Malaysian public’s inefficient water use. To curb inefficiency, the government is suggested to practice high water tariff; this however is a sensitive issue since the public views water both as a public (social) good and is a human right. So, the question of how much one is willing to pay (WTP) becomes an important issue to explore. WTP refers to the final decision made on how much cash the consumer is willing to pay for a supply of water. In Malaysia’s case, WTP is linked to whether the public is willing to pay more for water services as they are used to paying less in the past. Ranges of water pricing consumers are willing to pay to get water provision in different countries have been reported in the literature; income and use of the good are the common economic determinants to measure WTP. This study investigates the role played by income and use of goods as components of basic economic model in influencing consumers’ WTP to pay more for water tariff. The online survey was participated by 252 household representatives (paid water users) in Malaysia. From one-way ANOVA tests carried out, this study found that both income and use of goods acted as determinants of WTP.