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):
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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.