Urban water restrictions: Attitudes and avoidance

Abstract

In most urban cities across Australia, water restrictions remain the dominant policy mechanism to restrict urban water consumption. The extensive adoption of water restrictions as a means to limit demand, over several years, means that Australian urban water prices have consistently not reflected the opportunity cost of water. Given the generally strong political support for water restrictions and the likelihood that they will persist for some time, there is value in understanding households' attitudes in this context. More specifically, identifying the welfare gains associated with avoiding urban water restrictions entirely would be a nontrivial contribution to our knowledge and offer insights into the benefits of alternative policy responses. This paper describes the results from a contingent valuation study that investigates consumers' willingness to pay to avoid urban water restrictions. Importantly, the research also investigates the influence of cognitive and exogenous dimensions on the utility gain associated with avoiding water restrictions. The results provide insights into the impact of the current policy mechanism on economic welfare.