Effect of Risk Perception on Willingness to Pay for Improved Water Quality

These empirical results suggest that CVM can yield theoretically consistent results regarding the quantity of the good being purchased, even for complex goods which consumers are not used to valuing. Consumers expressed a higher WTP when they believed that they were purchasing a larger volume of the public good, defined as protection from nitrates only versus protection from all contaminants. They also expressed higher WTP when perceived risk was greater. On the other hand, consumer subjective risk perceptions understated actual risk, as measured by USEPA public health standards, which led to a downward bias in WTP. This suggests that public information programs may be needed before consumers will provide an optimum level of support for public goods, such as water quality programs, It also suggests that consumer purchases of private goods to avert the consequences of adverse water quality are also less than optimal.