WILLINGNESS TO PAY FOR RESIDENTIAL WATER USING STATED PREFERENCE ANALYSIS: THE CASE OF VOLOS, GREECE

Abstract

In the present research a questionnaire survey was performed with personal interviews in households in the city of Volos, Greece, in order to determine the willingness to pay for changes in the water service level using the Stated Preference Analysis or Conjoint Analysis. The stated preference game consists of four factors. One of them is the tariff, and the rest are service factors of interest, such as water quality, smell and supply-pressure. Each factor has two, three or four levels, each of which describes a certain service level. Eight choice tasks are presented to each of the respondents and the combinations of the factors and levels are sufficiently varied so that the willingness to pay can be estimated for all service changes. From the answers of the stated preference questions by the respondents - by choosing between two alternative answers A and B - the consumers' utility function can be estimated. A probability model is used in order to be able to allow effects of unobserved variation among the respondents and to take pure random choices into account as well as errors due to measurement or incorrect information. The model is estimated by maximum likelihood. This estimation method gives unbiased and efficient estimates. Willingness to pay is then calculated from the values of the model parameters. Finally the water demand curve is estimated and is compared with the demand curve calculated on earlier survey using the Contingent Valuation Method in the city of Volos.