This dissertation consists of three essays that examine consumer behavior with respect to drinking water quality issues. The first essay uses contingent valuation method to explore consumers' willingness to pay (WTP) for a hypothetical material in home drinking water infrastructure that will remain leak free. Willingness to pay is investigated using both dichotomous choice and dichotomous choice with follow-up formats using a national telephone survey of consumers. Our results indicate that consumers' concerns about future system failures and income positively affect their WTP for an improved material while satisfaction with the water quality, education and the bid amount asked negatively affect their WTP for an improved material. There are no significant differences in the determinants of WTP between respondents who have experienced problems with home water infrastructure and respondents who have not. Furthermore, the estimated mean WTP does not change significantly between the dichotomous choice questioning format and the dichotomous choice with follow-up format The second essay investigates the determinants of consumers' willingness to accept improvement programs for three drinking water issues: water quality, pinhole leaks in home plumbing infrastructure and aging public infrastructure. The research is based on a mail survey of consumers in Northern Virginia and the Maryland suburbs of Washington D.C. The analysis focuses on the relationship between information, risk perceptions and willingness to pay. Results indicate that the choice to support any of the programs is negatively affected by the cost of the proposed improvement. Consumers' risk perceptions, the external information provided in the survey and whether they read the annual report from their water utility affect their choices for investment in improvement programs. The third essay examines the effect of risk perceptions about tap water, general risk aversion and consumers' characteristics on their decision to avert drinking water risks and related expenditures. Results are based on the same survey data from the second study. The risk aversion measure is elicited using the sequence of questions employed in the National Panel Study of Income Dynamics. Results indicate that consumers' risk perceptions affect both the decision to avert and the amount spent on averting activities. However, we do not find a significant impact of risk aversion on averting behavior. In addition we find that respondents were more likely to use water treatments if they were unsatisfied with their tap water or had problems or concerns with water odor and particles. / Ph. D.

This dissertation is composed of three essays investigating three aspects of future water issues. The first essay focuses on an examination of water scarcity issues caused by rapid population growth and economic development in Texas. The second essay examines water scarcity under climate change scenarios in Texas. The third essay discusses arsenic-related water quality issues in the drinking water. An integrated economic, hydrological, and environmental model is developed for the first two essays by implicitly incorporating uncertainty about future climate, water demand from all types of water use, a spatial river flow relationship, interaction between ground and surface water, institutional regulations, and the possibilities of inter-basin water transfers (IBTs). In studying water scarcity under economic growth and population growth, we find that while some cities and counties have sufficient water, there are some other cities and counties (especially Dallas, Fort Worth and Austin) facing different degrees of water scarcity problems. In studying the climate change impact, four Global Circulation Models (GCMs) with three Special Report on Emissions Scenarios (SRESs) yield consistent results. Water scarcity becomes even more severe for cities. Texas realizes slight gains in earlier periods and a net loss beginning in 2060. This study finds that twelve IBTs, if there is no climate change, and fourteen IBTs, under the climate change scenario, will be economically feasible in 2060. These IBTs can not only greatly reduce water scarcity, but also create new growth opportunity for Houston. Water is transferred from in-stream flow in source basins. There is no significant impact on other sectors except in-stream flow and water flow out to bay. In the third essay, a two-stage structural model is developed to model household risk-averting behavior with respect to arsenic-related mortality risk in the drinking water. The empirical results suggest that risk perceptions for the parents and children are important in the decision of how much to spend on water treatment, but not in whether or not to treat water. Parents in our sample displayed mixed altruism. The information generated by this dissertation can help state agencies to manage water resources and to improve water-related human health, especially health for children, more effectively and more efficiently.