Department of Economics, UCSD

We present the results of an in-depth study in a small Southern Illinois town looking at the public's preferences with respect to reducing trihalomethanes (THMs) in their public drinking water system. THMs are an interesting environmental risk to study. First they are a low-level risk created as a byproduct (via chlorination) of reducing the much larger risk of bacterial contamination. Second, THMs are a weak carcinogen (with a scientific debate over how weak) with a long latency period. Third, small towns pose an interesting policy trade-off question with respect to THMs due to the sharply rising per capita cost of carbon filtration as population decreases. Further, filtration at the home or tap level is a viable alternative to public filtration. These issues are considered in the context of designing a survey to elicit maximum willingness to pay (WTP) for a reduction in THMs. The key survey design question involves how to communicate low-level risks of different magnitudes to respondents. Respondents were randomly assigned to different risk levels and statistical tests reject the hypothesis that WTP estimates are insensitive to the risk levels assigned. Our value of a statistical life estimates are quite low relative to most estimates in the literature. Our estimates should be low, however, if respondents discount due to the long latency period. After allowing for discounting using commonly used rates, our value of a statistical life estimates are well within the range commonly found in the literature for WTP to avoid current period fatal accidents.