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Why Do Households Say They Are Willing to Pay So Little for Improved Public Water Service?

4.08 These findings from the household surveys are perplexing. Many economic theorists and critics have expressed concern that the results of willingness-to-pay surveys will not be reliable because respondents will say they will pay much more than they will in fact pay when confronted with a real decision. In this case the evidence seems to indicate just the opposite. For example, although 57 percent of respondents in Edem said that they would not pay N20 per month for a private connection, about two-thirds reported that they were already paying more than N25 per month during the dry season to tanker trucks and neighbors. Only 2 percent of the respondents in Ekwegbe said that they would pay N40 per month for a private connection, but 40 percent are already paying more than N50 per month to vendors in the dry season.

4.09 Why do households say that they are willing to pay so little for improved public water service when they are already paying such high prices to water vendors? The answer to this question has important policy implications, because if the majority of households are really unwilling to pay more than a few naira per month for a public tap, then progress toward full cost recovery is not likely in the rural areas of Anambra State.il' If the provision of subsidized services is not feasible, the current system of water vending may be the most appropriate service level at this time. On the other hand, if households would pay for the costs of an improved water supply system once they have experience with it, and if it were made available under conditions that they found more attractive than current government projects, then rural water supply projects could be financially viable.

4.10 To better understand households' bids, we reinterviewed half of the sample households in each of the three villages and gave them an opportunity to revise their answers to the willingness-to-pay questions from the previous day. Table 4 presents (1) the percentage of respondents who revised their bids for public taps and for private connections in each village; (2) the proportion who revised their bids downward (and upward); and (3) the average percentage reduction (and increase) of these revised bids.

4.11 If the respondent revised his (or her) answer, the enumerator asked him to explain the reasons why he changed his willingness-to-pay bid. Because the respondent had also been asked how much the household usually spends on water from tanker trucks, the willingness-to-pay bid for a public tap could be compared with the current monthly expenditure on vended water. If the willingness-topay bid was less than what the respondent said the household was currently paying water vendors in the dry season, the enumerator asked the respondent to explain why his bid for an improved water system was lower.

ji/ A multivariate analysis of the determinants of the WTP bids is presented in a second paper (Whittington, Smith, Ruiz, Okorafor, Okore, and McPhail, 1989). In summary, the socioeconomic variables suggested by economic theory do affect households' WTP bids, which increases our confidence in the reliability of these bids.