Reclaimed Wastewater and the WTP to avoid Summer Water Restrictions: Incorporation Endogenous Free-riding Beliefs

Climate change may cause more frequent seasonal water shortages. Water-scarce countries already use reclaimed household wastewater for subsequent uses that do not require potable water. Views on the degree of acceptability of reusing wastewater and a distrust of one’s water provider may deter countries like Canada and the United Kingdom from adopting these technologies. This paper reports on results from a 2009 Canadian Internet-based contingent valuation study. Two water management programs were presented: a program to reduce summer water use through water restrictions and a program to allow citizens to avoid summer water restrictions through the use of reclaimed household wastewater. The paper estimates the willingness-to-pay (WTP) for the second program and finds trust in the water utility, belief in future drought conditions, and age to be important factors, as is the belief that members of one’s community will not voluntarily reduce water use by the required amount. The latter introduces a potential endogeneity bias in responses to discrete choice WTP questions. Joint estimation of the underlying WTP function with a model to explain a respondent’s belief in community free riding is undertaken. The paper contributes to the literature on valuing the avoidance of water restrictions, elicitation of free riding beliefs, and the use of endogenous regressors in discrete choice models