Willingness to Pay for the Quality of Drinking Water

Abstract

Willingness-to-Pay to avoid risks has long been recognised as an important response to perceived environmental and health hazards. Abdalla, et al. (1992) have documented the existence of consumer averting behaviour in response to potential water contamination, while Musser, et al. (1992) Smith and Desvouges (1986) and Courant and Porter (1998) were among the first to provide a theoretical framework for the averting behaviour in response to pollution. All these studies estimated that averting behaviour formed a lower bound willingness-to-pay for reduction in pollution under certain conditions. In developing countries willingness-to-pay and demand for the good quality drinking water is often low. The major causes are lack of awareness regarding the contamination of drinking water and low levels of household incomes. The objectives of this paper are (a) to estimate the effects of formal and informal awareness of households on the demand for the home purification methods and b) to estimate willingness to pay for the safe drinking water. To accomplish these objectives we develop a theoretical framework of households’ water purification behaviour by incorporating the wealth and awareness indicators of households.