Selected Empirical Analyses
New Horizons in Environmental Economics series
Edited by Phoebe Koundouri
Chapter 14: Individual-specific welfare measures for public goods: a latent class approach to residential customers of Yorkshire Water
14. Individual-speciﬁc welfare measures for public goods: a latent class approach to residential customers of Yorkshire Water Riccardo Scarpa, Kenneth G. Willis and Melinda Acutt 1. INTRODUCTION As well as the provision of water as a private good for residential and business customers, water companies are responsible for management actions that aﬀect the provision of public goods. This is well recognized and for this, as well as social policy reasons, the market operations of such companies are publicly regulated. Water customers pay a ﬂat rate for water provision, either on property value or measured consumption. In the process of water provision, the management of water companies has discretion on how to achieve targets of water delivery and waste water disposal to satisfy demand, subject to legal minimum standards. In doing so, they also jointly provide certain levels of ‘public goods’, such as bathing water quality, water quality in rivers, risk of ﬂood in case of piping malfunctions etc. The supply of water delivery targets is compatible with a large variety of combinations of diﬀerent levels of related public goods. Optimal supply level will depend on consumer preferences and willingness to pay for alternative levels of joint supply of the private/public good package. Such preferences cannot be derived from market transactions because customers cannot shop around for diﬀerent levels of provisions of the public goods associated with water supply. An alternative way to investigate these preferences is via statements of choice. Stated preference studies have recently established...
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