Willingness to Pay for Alternative Programs to Improve Water Quality in the Chesapeake Bay

Abstract

Over the last century the Chesapeake Bay has been plagued by pollution, disease and overharvesting of its resources. As a result, the Bay has been the focus of substantial research and the beneficiary of numerous environmental programs. Previous work has suggested that people are willing to pay for improved water quality in the Chesapeake Bay. For policymakers, the key challenge is to determine how to allocate scarce funds across alternative regulatory and subsidy programs. This thesis investigates three new research questions that relate to the policymaker's problem. First, does WTP for a given water quality improvement depend on the process used to obtain that improvement? Second, does introducing a publicly funded program to improve water quality crowd out private donations to charitable organizations? Third, could oysters in the Chesapeake Bay be successfully marketed as a "green" good?

The results from an attribute based choice experiment survey indicate that individuals value process and that they have a higher value for water quality improvement processes that include positive externalities such as increasing oyster populations and planting acres of tall grasses. The results also imply that the new water quality program will crowd out a small portion of private donations to charitable organizations. For example, a $1 tax increase for a new water quality program would crowd out approximately $0.02 of private donations to Chesapeake Bay organizations. Finally, results from a contingent valuation exercise suggest that oyster consumers are willing to pay a significant premium for ecolabeled oysters. Specifically, consumers are willing to pay a 58% premium for half-shell oysters.