Abstract
Marginal willingness to pay for public investment under urban environmental risk is considered in this paper. In particular, we present a model that takes into account a bounded rationality on the ability of risk perception, the information situation, and people's threshold acceptance of risk. A case study of the evaluation of risk in municipal water use is presented. In order to investigate the information situation and risk perception of people, a questionnaire survey was conducted. The survey reveals that risk awareness is a factor in drinking water, and that people change their choice based on risk information. The effects of information on risk and public investment are then considered. From some numerical examples, marginal willingness to pay is found to be low in the case of high risk, because of consumers' self-defensive activities. In other words, marginal willingness to pay for public investment is high when there is little or no averting behavior. Moreover, it is shown that consumers' perception of risk is dependent largely on information on risk, countermeasures taken by public authorities, and overconfidence in private averting goods.
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