Consumers’ Preferences and Derived Willingness-to-Pay for Water Supply Safety Improvement: The Analysis of Pricing and Incentive Strategies
Abstract
:1. Introduction
2. Theoretical Framework
2.1. WSS Attributes and Levels
2.2. Variable Explanation
3. Statistical Models
3.1. Theoretical Models
3.2. Econometric Models
4. Survey and Data
4.1. Survey Design and Implement
4.2. Sample Characteristics
5. Result
5.1. Estimate Results of CL and MXL Models
5.2. Implicit Prices and Compensating Surplus
6. Discussions and Policy Implications
6.1. Consumers’ WTP and Pricing Strategies
6.2. Consumer Preferences and Incentive Polices
7. Conclusions
Author Contributions
Acknowledgments
Conflicts of Interest
References
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Attributes | Definitions | Levels | Coding |
---|---|---|---|
INTERRUPT | Frequency of water supply temporary interruptions (i.e., average number of occurrences during a year) | Frequent occurrence (no less than 3 times per year) * | 0 |
Rare occurrence (equal or less than 3 times per year) | 1 | ||
PRESSURE | Stability of tap water supply pressure | Unstable, insufficient in the peak period * | 0 |
Stable all the time | 1 | ||
QUALITY | Quality of the tap water (expressed in terms of the number of samples failure to meet the required Standard for Drinking Water Quality) | Maintain current water quality but it might fail to meet the standard sometimes * | 0 |
Improve drinking water quality to meet the standard all the time | 1 | ||
SERVICE | Water supply services including maintenance and information | Delayed maintenance or insufficient information * | 0 |
In-time maintenance and comprehensive information | 1 | ||
PRICE | Increase in unit water price | 0 RMB/m3 * | continuous |
0.5 RMB/m3 | |||
1.0 RMB/m3 | |||
1.5 RMB/m3 | |||
2.0 RMB/m3 |
Attributes | Option A | Option B | Status Quo |
---|---|---|---|
INTERRUPT | Rare (≤3 times/year) | Often (>3 times/year) | often (>3 times/year) |
PRESSURE | Stable all the time | Unstable in the peak period | Unstable in the peak period |
QUALITY | Meet the standard all the time | Meet the standard all the time | Failed to meet the standard sometimes |
SERVICE | Delayed maintenance or insufficient information | In-time maintenance and comprehensive information | Delayed maintenance or insufficient information |
PRICE | 1.0 RMB/m3 | 2.0 RMB/m3 | 0 |
Your Choice | □ | □ | □ |
Variables | Descriptions | Mean |
---|---|---|
CON | The level of perception on WSS (10 = not concern at all, 1 = highly concern) | 4.031 |
ATT | Consumers’ attitude to WSS improved project (1 = support, 0 = otherwise) | 0.767 |
TRU | The degree of consumers’ confidence in the authorities (5 = quite trust, 1 = not trust at all) | 3.186 |
INF | The degree of information disclosure on WSS (5 = sufficient disclosure, 1 = no disclosure) | 2.789 |
GENGER | gender (male = 1, female = 0) | 0.55 |
CHILD | the numbers of children in the household (at least one child under 13-year-old = 1, otherwise = 0) | 0.45 |
Age | ||
AGE1 | no more than 30 years | 64.44% |
AGE2 | 31–40 years | 25.87% |
AGE3 | 41–50 years | 5.72% |
AGE4 | no less than 50 years | 4.97% |
EDU | ||
EDU1 | Associate degree or lower | 32.89% |
EDU2 | Bachelor degree | 46.27% |
EDU3 | Master degree or above | 21.14% |
INC | Personal monthly income | |
INC1 | No more than 3000 Yuan | 20.40% |
INC2 | 3001–6000 Yuan | 33.33% |
INC3 | 6001–10,000 Yuan | 30.85% |
INC4 | 10,000 Yuan or more | 15.42% |
Sample size | 388 |
Variables | CL Model | MXL Model | ||
---|---|---|---|---|
Basic | Interaction | Basic | Interaction | |
Mean effect | ||||
INTERRUPT | 0.1844 *** (0.0234) | 0.1945 *** (0.0236) | 0.2691 *** (0.0640) | 0.2177 *** (0.0606) |
PRESSURE | 0.6865 *** (0.0250) | 0.7085 *** (0.0252) | 1.1045 *** (0.0622) | 1.0515 *** (0.0586) |
QUALITY | 1.6448 *** (0.0273) | 1.7090 *** (0.0279) | 2.8025 *** (0.1131) | 2.7697 *** (0.1058) |
SERVICE | 0.2734 *** (0.0236) | 0.3021 *** (0.0239) | 0.2133 *** (0.0827) | 0.3360 *** (0.0468) |
PRICE | −0.7171 *** (0.0219) | −0.7708 *** (0.0223) | −1.2000 *** (0.0288) | −1.1887 *** (0.0287) |
ASC | 0.4010 *** (0.0390) | 1.3267 *** (0.2133) | 0.9726 *** (0.0498) | 1.2693 ** (0.3559) |
ASC × CON | −0.0515 *** (0.0092) | −0.0340 ** (0.0172) | ||
ASC × ATT | 0.8130 *** (0.0533) | 0.4280 *** (0.0901) | ||
ASC × TRU | 0.2746 *** (0.0304) | 0.2573 *** (0.0455) | ||
ASC × INF | 0.1833 *** (0.0274) | 0.1407 *** (0.0455) | ||
ASC × GENDER | −0.3342 *** (0.0447) | −0.4441 *** (0.0842) | ||
ASC × CHILD | −0.0872 (0.0539) | −0.2978 (0.0993) | ||
ASC × AGE1 | −0.3814 ** (0.1922) | −0.9479 *** (0.2846) | ||
ASC × AGE2 | 0.1828 (0.1959) | −0.7506 *** (0.2876) | ||
ASC × AGE3 | −0.2493 (0.2030) | 0.3558 (0.3047) | ||
ASC × EDU1 | 0.4449 *** (0.0643) | 0.6674 *** (0.1253) | ||
ASC × EDU2 | 0.1944 *** (0.0612) | 0.7497 *** (0.1111) | ||
ASC × INC1 | 0.0611 (0.0967) | −0.2816 *** (0.1472) | ||
ASC × INC2 | −0.2837 *** (0.0859) | −0.5897 *** (0.1332) | ||
ASC × INC3 | −0.5724 *** (0.0818) | −0.9667 *** (0.1282) | ||
Standard deviation effects | ||||
INTERRUPT | 1.1872 *** (0.0562) | 1.0083 *** (0.0444) | ||
PRESSURE | 1.021 *** (0.0544) | 0.9478 *** (0.0560) | ||
QUALITY | 2.8350 *** (0.1118) | 2.1622 *** (0.0654) | ||
SERVICE | 1.5601 *** (0.0661) | 1.2186 *** (0.0449) | ||
Log-likehood | −16,903.36 | −16,112.01 | −12,432.68 | −12,333.84 |
Wald chi2 | 6685.78 | 7403.68 | ||
Pesudo-R2 | 0.2069 | 0.2440 | ||
LR Chi2 | 8359.63 | 7556.33 | ||
Observations | 58,200 |
Attribute | INTERRUPT | PRESSURE | QUALITY | SERVICE |
---|---|---|---|---|
Mean WTP | 0.18 | 0.88 | 2.33 | 0.23 |
(95% CI) | (0.08–0.28) | (0.78–0.98) | (2.13–2.53) | (0.12–0.35) |
Attributes | Scenario 1 | Scenario 2 | Scenario 3 | Scenario 4 | Scenario 5 |
---|---|---|---|---|---|
INTERRUP | √ | - | - | - | √ |
PRESSURE | - | √ | - | - | √ |
QUALITY | - | - | √ | - | √ |
SERVICE | - | - | - | √ | √ |
0.18 (0.16–0.28) | 0.88 (0.76–0.92) | 2.33 (2.30–2.66) | 0.28 (0.22–0.38) | 3.63 (3.02–4.25) |
Attributes/Factors | WTP/Impact | Public Policies |
---|---|---|
Improvement of water quality | 2.33 RMB/m3 | Priority in investment strategies to improve water treatment technology, facilities and distribution networks |
Improvement of pressure stability | 0.88 RMB/m3 | |
Improvement of water supply service | 0.28 RMB/m3 | |
Improvement of interruption | 0.28 RMB/m3 | |
Income | + | Cross-subsidy policy |
Education level | − | |
Concern about WSS | + | Transparent Information and Communication Policy |
Knowledge of WSS | + | |
Attitude to WSS improved projects | + | Public Participation Policy |
Trust in the authorities | + |
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Wang, J.; Ge, J.; Gao, Z. Consumers’ Preferences and Derived Willingness-to-Pay for Water Supply Safety Improvement: The Analysis of Pricing and Incentive Strategies. Sustainability 2018, 10, 1704. https://doi.org/10.3390/su10061704
Wang J, Ge J, Gao Z. Consumers’ Preferences and Derived Willingness-to-Pay for Water Supply Safety Improvement: The Analysis of Pricing and Incentive Strategies. Sustainability. 2018; 10(6):1704. https://doi.org/10.3390/su10061704
Chicago/Turabian StyleWang, Jia, Jiaoju Ge, and Zhifeng Gao. 2018. "Consumers’ Preferences and Derived Willingness-to-Pay for Water Supply Safety Improvement: The Analysis of Pricing and Incentive Strategies" Sustainability 10, no. 6: 1704. https://doi.org/10.3390/su10061704
APA StyleWang, J., Ge, J., & Gao, Z. (2018). Consumers’ Preferences and Derived Willingness-to-Pay for Water Supply Safety Improvement: The Analysis of Pricing and Incentive Strategies. Sustainability, 10(6), 1704. https://doi.org/10.3390/su10061704