Spatial heterogeneity and transboundary pollution: A contingent valuation (CV) study on the Xijiang River drainage basin in south China

•We Study the potential impact of transboundary water pollution on people's WTP•We found WTP to be negatively affected by upstream city's water quality•This negative impact is decay with distance from upstream city•The relative bargaining power between up and downstream city also play roles•We reported huge social benefit gain with an integrate river management system

We examine how transboundary river pollution affects WTP for a river improvement project. The survey conducted in 20 cities of the Xijiang River basin demonstrates that downstream city report lower WTP when its upstream is more polluted. This negative externality decreases with distance and relative bargaining power of downstream city. The simulated gain in social benefit from an integrated river basin management, which reduces people's concerns about this externality, is significant. Such gain can also be regarded as upper bound for transfer from downstream to upstream in the “Ecological Service Payment” regime, a market-based environmental policy under pilot in China.