Non-market valuation using stated preferences: applications in the water sector

This thesis is concerned with the application of stated preference methods to non-market valuation problems. It reviews the literature on the state of the art of the method, and applies the techniques to three applications in the water sector. In the first application, estimates are presented of the value to households in England and Wales of improvements to the quality of water in the natural environment. The need for value estimates arises from the European Community Water Framework Directive, which drives water policy across the European Union. Area based values were generated to maximise the potential for subsequent policy incorporation and value transfer. These were found to vary from £2,263 to £39,168 per km 2 depending on the population density around the location of the improvement, the ecological scope of that improvement, and the value elicitation method employed. The second application investigates the cost of drought water use restrictions to households and businesses in London. Estimates of willingness to pay for service quality increments often play an important role in the decisions of regulators and regulated companies in industries where consumers have little opportunity to exercise their preferences for service quality. The estimates presented in this chapter are particularly applicable to regulatory appraisals of water company investment expenditure and to planning applications for projects to improve the resilience of urban water supply systems. The final application examines the reliability of values measured before an economic downturn for application during the downturn via analysis of near identical surveys conducted before, and during, the 2008-2010 economic recession. The main result is that the economic downturn led to lower willingness to pay when elicited via 5 the payment card contingent valuation method, but had no effect on values elicited via a dichotomous choice (i.e. referendum-type) contingent valuation question. Potential explanations for this finding are explored in light of the literature on closed-ended versus open-ended elicitation method comparisons