The Impact of Perceived Fairness on Consumers’ Willingness to Pay for Water Quality Improvements : Evidence from a Survey Experiment

Perceived fairness may affect people’s willingness to pay (WTP). In this study, an online survey with random experiments reveals that perceived fairness has a significant positive impact on consumers’ WTP for cleaner raw water (WTP1) and their WTP for tap water meeting higher water quality standards (WTP2). Perceived fair water tariff increment increases participants’ WTP by about 0.4 to 0.8 RMB yuan for raw and tap water quality improvements(WQI), accounting for 24%-45% of average residential water tariff in China. Furthermore, some contents about the reasons for increasing water tariffs and their framing affect perceived fairness but only in relation to WTP2. Under different scenarios, both WTP1 and WTP2 vary as perceived fairness changes. Finally, through an online ultimatum game, stronger social preference on fairness is associated with less WTP for WQI. Thus, water tariff authorities should provide the appropriate content and carefully choose the proper way to communicate with the public to improve their perceived fairness and WTP for WQI. The authorities should also pay attention to residents’ social preference on fairness