Economic valuation of domestic water uses

- Distinction between domestic water uses
- Preferences for the different domestic water uses
- Different prices for different uses
- A latent class with random parameters model has been applied.
- Two sources of heterogeneity identified: one for individuals and one for groups

There are many reasons of concern about the quality of water for domestic uses. The strategic goals of water tariffs must include savings, efficient management and equity in order to optimise availability of the best quality water. The main domestic uses of water are food preparation, personal hygiene and household cleaning; not all of them need the same quality, and for some of them there are even potential substitutes. In order to contribute to this debate, we need to know how these different uses are valued by direct users. This article focuses on eliciting values for different domestic uses, using discrete choice experiments. As far as we know, this is the first time that a differentiated valuation per use has been defined. The paper introduces three innovations in the design of the experiment. The design takes into account decisive variables in household water consumption, such as family size, together with the consumption level, and the options offered in the choice task are combinations of different prices for each of the uses. A latent class model with both common and class-specific random parameters is applied to better account for the influence of heterogeneity in the respondents' choices. The results show that the most valued use depends on the consumption level class.