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Reports of Water Quality Violations Induce Consumers to Buy Bottled Water

Published online by Cambridge University Press:  15 September 2016

Andreas Duus Pape  and
Misuk Seo
Andreas Duus Pape*
Affiliation:
Department of Economics at Binghamton University
Misuk Seo
Affiliation:
Economics Department at Dankook University in South Korea
*
Correspondence: Binghamton University Economics Department ▪ PO Box 6000 ▪ Binghamton NY, 13902 ▪ Phone 607.777.2660 ▪ Email apape@binghamton.edu.
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Abstract

The 1996 Safe Drinking Water Act Amendments required that water utilities send quality reports to customers. We test whether receiving such reports of health violations increases purchases of bottled water using newly released data and disaggregate changes in demand at the intensive and extensive margins. We find that a water-quality violation makes American households 25 percent more likely to purchase bottled water and, among purchasers, expenditures increase 4–7 percent, both larger responses than found in previous studies. Consumers spend approximately $300 million per year—about 4 percent of annual national spending on bottled water—to avoid health risks associated with violations.

Keywords

demand response to informationenvironmental qualitywater quality violation
Type
Research Article
Information
Agricultural and Resource Economics Review , Volume 44 , Issue 1 , April 2015 , pp. 78 - 93
Copyright
Copyright © 2015 Northeastern Agricultural and Resource Economics Association 

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