Estimation of willingness to pay for improved water supply service: Case of Algerian households

Abstract

The purpose of this article is to evaluate the water company in Algeria (ADE) subscribers’ Willingness To Pay (WTP) for a better service offer. This study assessed the WTP for improved drinking water in the department of Souk-Ahras (Algeria), using contingent valuation survey data of 5,342 households, with a response rate of 10.86% (greater than 10% of each municipality's total number of subscribers). Then, Probit and Tobit models were applied to analyze the determinants of WTP. The results show that the majority of respondents (62.84%) testified that they were not satisfied with the quality of the service provided in terms of quantity and quality of the water distributed. This research revealed that the WTP for an improved water supply service was approximately 16.18 Algerian dinar (DZD)/m3 (approximately 0.11 US$/m3) instead of the current tariff (6.3 DZD/m3–0.04 US$ /m3). With this new water tariff, the average water charge for a household is around 1.37% of the average monthly income. HIGHLIGHTS The households reported an average WTP of 0.11 US$/m3.; The determinants of WTP were analyzed using the Probit and Tobit models.; 62.84% of respondents stated that they were dissatisfied with the service in terms of the quantity and quality of the water distributed.; The application of the new tariff increased the water bill from 220%.; If the ADE applies the new tariff, the annual revenue will be 1,691,056.62 US$.;

Keywords

• ade
• algeria
• contingent valuation
• water supply service
• willingness to pay