Summary of Meeting Paper

The 1996 Annual Meeting of the Society for Risk Analysis-Europe

Preference Construction and Willingness to Pay for Reductions in Risk: A Case Study on Bathing Water Quality. Ian H. Langford, Centre for Social and Economic Research on the Global Environment (CSERGE), University of East Anglia, Norwich and University College, London and School of Health Policy and Practice, University of East Anglia, Norwich; Stavros Georgiou and Ian J. Bateman, Centre for Social and Economic Research on the Global Environment (CSERGE), University of East Anglia, Norwich and University College, London; and Anné-Lise McDonald, School of Health Policy and Practice, University of East Anglia, Norwich

INTRODUCTION

There has been a great deal of recent interest in the quality of beaches and bathing waters in the United Kingdom The pollution of beaches by sewage was ranked fourth in a survey of the public's environmental concerns carried out for the Department of the Environment in 1993. Despite this, it has been estimated that up to twenty percent of UK beaches fail to meet the minimum safety and legal standards set by the European Commission (NRA, 1995). Sewage discharged into the marine environment is one of the main sources of .pollution affecting the quality of these waters and has a number of damaging consequences, one of which results in public health risks from bathing in coastal waters. The main problem for human health is that domestic sewage discharge contains a number of microbiological agents which can cause, illness and infections. The capital costs of achieving compliance with existing directives are expected to exceed £9 billion (1993/94 £) and estimates of the additional cost of a proposed amendment to the Bathing Water Directive have been put at £1 billion. Given these huge costs the question arises as to whether such spending constitutes good value for money. We thus need to look at the costs and benefits of better quality bathing water.

The research discussed here forms part of a pilot study which afire to estimate the benefits of reducing health risks from bathing water using a technique called contingent valuation (CV) (Georgiou et al., 1996). The CV method is a survey technique that has been used to elicit information about individuals' (or households) preferences for many environmental goods and services. In this study the CV method is used to examine the determinants of preferences regarding risk and willingness to pay (WTP) to reduce risks of illness from the quality of bathing water. However, here we will focus more on the levels of perceived risk of individuals regarding bathing water quality, and examine whether this relates to stated WTP. More extensive details of the economic analysis can be found in Georgiou et al. (1996).

METHODS

A questionnaire survey was undertaken at two beaches in eastern England, namely Great Yarmouth (n=197) and Lowestoft Pier Beach (n=203). These beaches were chosen, because, at the time of the survey, one of the beaches (Lowestoft) passed the EC Bathing Water Directive standard while the other (Great Yarmouth) failed. These provided two valuation scenarios: the Great Yarmouth sample gave a measure based on the willingness to pay for a gain (the compensating surplus), whilst the Lowestoft sample gave a measure based on the willingness to pay to avoid a loss (the equivalent surplus). According to standard economic theory these two measures should be the same for identical goods and for the same change in provision of the good (Bateman and Turner, 1993). However, in this study, although the good was the same in both scenarios, the changes in provision were not, as the initial levels of quality relative to the EC standard may differ between beaches. We thus had no prior expectations regarding the relationship between the two measures. The payment vehicle used in the survey was an increase in water rates, and an open ended willingness to pay (WTP) question was used.

In addition, a set of questions relating to perceived risk were asked, based on the psychometric literature (e.g. Slovic et al., 1981; Marris et al., 1996). These questions looked at how risky respondents thought various activities, products or technologies were, and how unacceptable they felt the current risk from each of these were, to people in the UK. These questions were designed to investigate respondents attitudes towards risks to health from a variety of sources and to compare these with risks they may perceive from bathing water. The questions were phrased in terms of societal risks, though a question regarding personal health risks from swimming in the sea was also asked in the valuation question section. The activities, products or technologies that respondents were questioned about were (in order of presentation): food additives; air pollution; smoking; AIDS; nuclear power; bathing water quality; driving and; sunbathing. Further questions elicited information about respondents' knowledge and concern over risks to their personal health, and their beliefs about past personal illness attributable to sea bathing water. Respondents were also asked to flu in the Health Locus of Control Questionnaire, a standard tool which determines whether individuals see their health as internally or externally controlled (Wallston et al., 1978).

RESULTS

Figure 1 displays the difference in perceived risk from bathing water quality, with 95% confidence intervals, for different user groups. These use groups are, for Great Yarmouth: 11 = holiday makers; 12 = daytrippers; 13 = locals, and for Lowestoft: 21 = holiday makers; 22 = daytrippers; 23 = locals. Panel (a) shows that the perceived riskiness for locals in Great Yarmouth is significantly higher than all other categories, except Lowestoft locals (Tukey pairwise comparisons, = 0.05). For unacceptability of risks, panel (b) shows that there are nonsignificantly higher scores for day trippers and holiday makers at Great Yarmouth. Interestingly, there was a great deal of difference between the subsamples regarding knowledge of the EC standard at the two sites. In Great Yarmouth, only 12.2% correctly knew that the beach had failed the standard. This split into 6.9% of holiday makers, 9.3% of daytrippers and 50% of locals (compare with Figure 1). 84.0% of holiday makers at Great Yarmouth stated that they did not know whether the beach had passed the standard, and 9.1 % incorrectly stated that it had. In contrast, 60.9% of respondents correctly stated that Lowestoft had passed, including 46.2% of Holidaymakers, 65.1% of daytrippers and 71.4% of local residents. Other results include (with differences being judged as statistically significant = 0.05):


Figure 1 (a) perceived riskiness and (b) unacceptability of bathing water risks.

With regards to WTP, there was no significant difference in perceived riskiness between those who would and would not, in principle, support an increase in water rates to improve/maintain bathing water standards. However, those who said they did not know whether they would pay more had significantly lower perceived riskiness scores, suggesting that ambivalence could be related to lack of interest in the issue. Of those who said they would pay nothing, 56.9% stated they were paying too much tax already, and 21.3% cited "fat cat syndrome" as the main reason, i.e. relating to the current controversy over UK privatised water utility profits and directors pay. No significant differences were found between the numbers at each site who were in favour of the principle of paying at least some amount, although the percentage was higher at Lowestoft (50.0%) than Great Yarmouth (40.3%). No significant differences were found for monetary amounts between Great Yarmouth and Lowestoft or visitor type subgroups either. However, there were some interesting differences between variables which were significantly associated with WTP between sites and user groups. In summary the significant variables from multiple regression analyses are:

DISCUSSION

For risk perception, the importance of different sites and visitor groups was evident. Regular users, i.e. locals and day trippers, were acquainted with the poor quality of bathing water at Great Yarmouth, and were consequently more likely to perceive it as being a risk to society. Further, knowledge amongst visitors on the relationship between bathing water quality and regulatory standards was much lower at Great Yarmouth than Lowestoft. There was some evidence that visitors who felt strongly about the issue, or had been personally ill, were choosing to visit Lowestoft because of the quality of its bathing water. Lowestoft advertises its high quality beach prominently, and this undoubtedly influences the knowledge base of visitors. However, those who bathed at both sites felt the risk from bathing water was lower than those who did not, which may reflect on perception influencing behaviour or vice versa.

The relationships between stated WTP and risk perception were complex. Georgiou et al. (1996) give a detailed discussion of economic and psychological interpretations, but stated WTP was clearly dependent on many, often competing, factors. Rejection of the payment vehicle (an increase in water rates) by some respondents was obviously important, and usage, income and educational attainment tended to increase WTP. However, there were interesting differences between subsamples. For holidaymakers at Great Yarmouth, going in the water personally was negatively associated with WFP, potentially because, with a low knowledge base, individual's did not perceive a risk. However, at Lowestoft, this variable had a positive association with WTP, suggesting that where knowledge of the good quality of the beach and water was higher, those choosing to bathe would choose to pay for this quality. For day trippers at Great Yarmouth, knowledge of the poor quality of the beach and water was negatively associated with WTP, suggesting that either there was a perception of quality being so poor as to be irredeemable, and/or that it was insufficient or ineffective action by the relevant authorities. The significant negative association with Powerful Others health locus of control and WTP at Great Yarmouth suggests that those who believe that their health is determined by powerful factors outside of themselves (e.g. the Government) supports these ideas.

In summary, risk perceptions and stated preferences, as measured by WTP, were found to have complex relationships, dependent on the characteristics of the site evaluated, and the patterns of use amongst respondents. Further work is planned for 1996-7 to explore these issues in greater detail.

Full list of references available from the authors. This research was funded by ESRC Grant Number L320223014.