Defensive spending on tap water substitutes: the value of reducing perceived health risks

Abstract

We examine factors that explain consumer spending on tap water substitutes using information from a national survey undertaken with a representative set of Canadian respondents. We develop a model to predict the percentage of households that undertake such spending for the purpose of reducing perceived health risks from tap water consumption. Using results from the model we estimate the magnitude of defensive expenditures to be over half a billion dollars (2010 US$) per year for Canada, as a whole. This is equivalent to approximately $48 per household per year or about $19 per person per year. Residents of Ontario, the province in which an Escherichia coli incident took place in 2000, have the highest willingness-to-pay of approximately $60 per household per year.