Estimating the Budgetary Impact of Higher Willingness to Pay for Residential Water Using CVM: A Case Study of Mauritius

Article type: Research Article

Authors: Madhoo, Yeti Nisha

Affiliations: Department of Economics, University of Mauritius Le Réduit, Mauritius

Note: [] Corresponding author. E-mail: [email protected]

Abstract: The paper attempts to ascertain the feasibility of reducing potable water deficits by charging residential consumers higher prices. The Contingent Valuation Method (CVM) is used to find out whether an upward revision of residential water tariffs would be compatible with consumer preferences and hence also politically feasible. Survey techniques using dichotomous choice format questions have been employed to elicit respondents' willingness to pay (WTP) for improved water services. The bid variable is found to be statistically significant in both the bivariate and multivariate logit models. Moreover, mean and median WTP estimates generated from these models are found to be much higher than what would be required by the first best standard (long run marginal cost) and the second best (average cost).

Keywords: Public utility budgets, marginal cost pricing, contingent valuation methodology, Mauritius

Journal: Asian Journal of Water, Environment and Pollution, vol. 4, no. 2, pp. 57-64, 2007