Anke D. Leroux

The recent stated preference literature emphasises the importance of incentive compatible elicitation methods, which depend on respondent beliefs that payment can be collected if provision occurs. We investigate this condition in a randomised field experiment where stated choices are incentivised financially. The objective of the treatment was to make choices salient by making each decision financially relevant and to increase the respondents' beliefs that future payments will be enforced. Our results show that the treatment increases estimates of the marginal utility of income, with the effect being economically and statistically significant for low‐income respondents. We develop a stylised theoretical framework that allows us to quantify the bias that is implied by the observed differences between the treated and control groups. We find that failure to account for respondents' doubts about payment coercion in an otherwise well‐designed survey inflates the marginal willingness to pay among low‐income respondents by a factor of at least 1.72.

Incentivized experiments and stated preference methods are commonly viewed as substitutes in preference elicitation. We leverage the distinct strengths of each approach by combining a fully incentivized risk experiment with a stated preference survey to model utility for intrinsically risky attributes. A door-to-door survey of 981 participants in a drought-prone region elicits preferences for alternative sources of municipal water, conditional on water price and quality. Participants’ observed and imputed risk attitudes are incorporated into preference estimation. Our results are consistent with the hypothesis that participants are concerned about water supply risk, but not about new technology risk. (JEL C51, D81)

The management of stormwater runoff via distributed green infrastructures delivers a number of environmental services that go beyond the reduction of flood risk, which has been the focus of conventional stormwater systems. Not all of these services may be equally valued by the public, however. This paper estimates households' willingness to pay (WTP) for improvements in water security, stream health, recreational and amenity values, as well as reduction in flood risk and urban heat island effect. We use data from nearly 1000 personal interviews with residential homeowners in Melbourne and Sydney, Australia. Our results suggest that the WTP for the highest levels of all environmental services is A$799 per household per year. WTP is mainly driven by residents valuing improvements in local stream health, exemptions in water restrictions, the prevention of flash flooding, and decreased peak urban temperatures respectively at A$297, A$244, A$104 and A$65 per year. We further conduct a benefit transfer analysis and find that the WTP and compensating surplus are not significantly different between the study areas. Our findings provide additional support that stormwater management via green infrastructures have large nonmarket benefits and that, under certain conditions, benefit values can be transferred to different locations.

Although water supply diversification has been proposed as a solution to dwindling water reserves, the optimal mix of natural and manufactured sources of water remains largely unexplored. We develop a dynamic portfolio model of water supply that hedges against the supply risks from all potential water sources, by taking into account the size of water reserves, uncertainties of water flows as well as differences in supply costs. The optimal portfolio shares for an existing water supply system are derived and compared with the observed contributions to total water stock, revealing unexploited hedging opportunities between various naturally occurring water sources as well as a general over‐reliance on manufactured water. The optimal solution implies that future supply augmentations should target natural sources of water ahead of manufactured water. It is estimated that the optimization of the water supply portfolio for a medium‐sized city results in annual cost‐savings of up to $463 million.